Contrary to popular belief, consumer bankruptcy is not something to be feared. It is the only way out of the debt spiral for a debtor who is unable to repay his/her loans, harassed by debt enforcement and hounded by debt collectors. However, before applying to the court for bankruptcy, it is worth knowing how to prepare for it in order to avoid mistakes and unpleasant legal consequences.
1. Not just for the rich
After amendment to the act on bankruptcy and restructuring law, which has been in force since January 1, 2015, everyone can afford to file for bankruptcy. The cost of filing an application to the district court (commercial division) is only PLN 30, the remuneration the trustee is much lower than in the case of companies, and incomparably cheaper than paying a bailiff. The trustee cannot earn less than one-fourth of the average monthly salary in the corporate sector or more than twice its value. In exceptional situations, when the proceedings are complicated or the trustee has to deal with many creditors, the court may increase his remuneration to four times the average monthly salary.
If you do not have the money to pay the costs of the insolvency proceedings, the judge may decide that the treasury will cover them initially and you will repay these funds during the repayment plan.
2. only for insolvent
In order for the court to decide on consumer bankruptcy, the debtor should be insolvent and the reasons for this must be beyond his or her control and be due to fortuitous situations, such as a serious illness or an accident at work. The court will not agree to declare bankruptcy if the consumer took out loans knowing that he or she would not repay them, or led to a financial disaster due to gross negligence. Soon, these restrictive provisions are to be relaxed too, and the government is working on another amendment to the law.
We can speak of insolvency when the debtor is unable to pay his financial obligations and the delay in payment exceeds three months.
3. meticulously complete the application form
The basis for success is the preparation of the necessary documents and the proper justification of the application. This should include your current assets, cash holdings, debts owed to banks and others and a list of creditors - including those whose receivables you are disputing. Finally, you need to substantiate your application well and include evidence of the circumstances that led to the insolvency, such as a certificate of serious illness or an accident report. Witnesses can also be called.
The receiver who will administer the estate is appointed by the court. But, as lawyers advise, it is advisable to contact a specialist in insolvency law before making an application.
4. it is worth being honest
Consumer bankruptcy this is the most beneficial way for the debtor to get out of debt. Thanks to it, they can repay their debts without stress, and also have a chance to write off the debts that were not returned after the repayment plan was completed.
However, there is one condition: the consumer must be honest. The court will not agree to bankruptcy if the debts have arisen due to gross negligence or intentional acts of the debtor. If, during the bankruptcy proceedings, the debtor has hidden assets or taken actions to the detriment of creditors, e.g. dismissed himself from his job, he cannot count on the court's leniency. In such situations, the bankruptcy proceedings will be discontinued and the consumer cannot seek bankruptcy for the next 10 years.
5. you won't end up on the pavement
Consumer bankruptcy is not about letting the debtor go down in his socks, but about putting him out of debt so that he can function normally in society. If your bankruptcy estate includes a flat or house, you will not be made homeless overnight. The court will allocate you an amount equivalent to the average rent of a flat in the same or a neighbouring locality for a period of one to two years. What this amount will be is decided by the judge, taking into account your earnings and how many dependants you have.
If you can show that you will pay your debts without having to sell your house or flat, the court can stop the liquidation of your assets and ask your creditors if they agree to the arrangement.
6. lose your car? Not always
With the declaration of bankruptcy, the consumer cannot dispose of his assets, sell his house or car. It is managed by a trustee, who will take an inventory of it and put it up for sale. This does not apply to necessities such as clothes, bedding, food supplies for a month, tools for work. In exceptional situations, when the car is used for a profession (e.g. the debtor is a taxi driver or is in the business of delivering pizzas), the court may exclude it from the bankruptcy estate.
7. You will not be left destitute
The bankruptcy estate includes your salary, but part of it will not be subject to attachment. The court will leave you with funds to support your family. What part of your salary is protected is determined by employment law. Alimony can be deducted up to three-fifths of your salary and other debts up to half of it. However, the debtor must be left with the amount of the minimum wage, i.e. PLN 1,459 net in 2017 (PLN 2,000 gross). If this is how much you earn, this amount will be free from seizure.
8. don't have a flat? No problem
Contrary to what some lawyers claim, owning a flat, house or other valuable things is not a necessary condition for the court agreed to consumer bankruptcy. If you have no assets, the judge only establishes a repayment plan that is consistent with your earning capacity. When you make them regularly - after a period established by the court - the rest of the obligations will be written off.
9. they can forgive you debts
Once the consumer's assets have been liquidated, the court establishes a plan for the repayment of debts that have not been satisfied. It determines how much of the consumer's income will go towards repaying them and how long this will take. The repayment plan may not cover a period longer than 36 months (sometimes 54 months). The court also determines how much of the financial obligations will be written off under the repayment execution. During this period, creditors may not enforce those debts that arose before the bankruptcy declaration. Once the repayment plan has been executed, the court waives the remaining debts and puts the consumer into debt.
In exceptional situations, if the debtor is unable to pay his creditors, the court may write off his obligations without setting up a repayment plan. Neither alimony nor obligations arising from pensions for compensation for causing illness, incapacity, disability or death shall be written off.
10. Spouses - though together, yet apart
One of the few shortcomings of the new Bankruptcy and Restructuring Law is the fact that spouses cannot conduct it jointly. Although they often take out loans together, they must file two separate applications. They can, however, request that the court combine the examination of both cases before announcing consumer bankruptcy, but further proceedings will be conducted separately. This means that two bankruptcy estates will be created, and each spouse will have a different trustee.
Data regarding consumer bankruptcies in 2016 and 2017 come from the Central Economic Information Centre and were prepared on the basis of the Court and Economic Monitor.
4 May 2017:
" Bankruptcy with a human face. The 10 most important things you should know about consumer bankruptcy
