Consumer bankruptcy is definitely becoming more popular among people with financial problems. A large group of such people wonder whether they can declare bankruptcy without any assets and how long such proceedings will take.
Contents:
Consumer bankruptcy – what is it?
Consumer bankruptcy is a bankruptcy procedure that is opened in relation to individuals who do not conduct business activity and are unable to repay their liabilities. It often happens that such individuals do not have assets that could be allocated to pay off creditors, or covering the costs of bankruptcy proceedings, but this is not a negative premise preventing the opening of such proceedings. In such a situation, after the opening of the proceedings, the State Treasury covers the costs on behalf of the Bankrupt consumer. According to the provisions of the bankruptcy law, the main purpose of the proceedings is to discharge the Bankrupt's debts. Such proceedings most often end with a partial or complete cancellation of the Bankrupt consumer's liabilities
Who can declare consumer bankruptcy?
Consumer bankruptcy may be declared - as the name suggests - by a consumer, i.e. a natural person who does not conduct business activity and is not an entrepreneur or a partner in a professional partnership or a partner in a commercial partnership, being liable for the obligations of the company without limitation with all his or her assets.
In order to have the legitimacy to declare consumer bankruptcy, one condition must be met, i.e. to be insolvent within the meaning of the Bankruptcy Law. According to this act, an insolvent person is considered to be a person who has lost the ability to settle their obligations for a period of at least three months. At the same time, it is worth noting that the court will dismiss the bankruptcy petition if bankruptcy proceedings were conducted against the applicant within 10 years from the date of filing the bankruptcy petition.
How long does bankruptcy proceedings take?
It is worth noting here that consumer bankruptcy is an exceptional procedure and differs from bankruptcy proceedings conducted against other business entities. First of all, as mentioned above, bankruptcy proceedings may be opened against a consumer even if they do not have sufficient funds to cover the costs of the proceedings, which in the case of business entities would result in the dismissal of the bankruptcy application.
It is this factor that significantly affects the duration of consumer bankruptcy. The lack of assets means that the trustee performing the function in the proceedings does not collect and does not monetize the assets of the Bankrupt in order to satisfy the creditors. In connection with the above, consumer bankruptcy can be carried out even in a few months. In a situation where the Bankrupt has assets, the tasks of the trustee there is liquidation, i.e. sale of this property. In such cases, the cooperation of the Bankrupt with the trustee is extremely important. The more efficiently the Bankrupt hands over the assets to the trustee, the faster the trustee will start the liquidation and thus the faster the bankruptcy proceedings themselves will end.
To understand the entire procedure, we present all stages of the consumer procedure below.
How to open bankruptcy proceedings
First, a bankruptcy petition must be prepared and filed with the appropriate court with the required attachments. This is of course a formality, but an extremely important one. Already at the stage of preparing the bankruptcy petition, the applicant can influence the speed of the proceedings. A properly prepared petition will speed up the work of the court if the relevant facts, conclusions and justifications are presented in a clear and transparent manner, and can also have a positive impact on the later work of the trustee, who, upon receiving the Bankrupt's petition, will be able to establish all the facts based on the petition and will not have to determine the actual state of affairs of the Bankrupt on his own.
The bankruptcy application is filed via the electronic system called the National Debt Register (KRZ). To file an application for consumer bankruptcy, the consumer must have an account in the KRZ system. People who are digitally excluded, who are usually the elderly or those who do not have access to the internet, have the option of filing an application for consumer bankruptcy on a paper form. The application form can be found on the websites of the courts or collected from the court's registry office.
The course of bankruptcy proceedings
Then, after the bankruptcy is declared, the trustee immediately notifies the creditors, bailiffs conducting enforcement against the bankrupt, of this fact, of whom the trustee is aware (and therefore indicated in the bankruptcy application). From the moment of making the announcement in the KRZ, creditors have 30 days to register for the proceedings.
During bankruptcy proceedings, one of the first actions taken by the trustee is to determine the status of the bankruptcy estate. At the same time, if there are no funds for the costs of the proceedings, the trustee applies to the State Treasury for an advance payment for the costs of the proceedings and if the bankrupt had assets that the trustee can sell, he liquidates the bankrupt's assets.
After the liquidation of the bankruptcy estate is completed, the trustee files a motion with the court to terminate the bankruptcy proceedings without establishing a repayment plan or prepares a draft repayment plan, i.e. a document that specifies the amount and period of time the bankrupt will have to make repayments to creditors after the bankruptcy proceedings are completed. Such a plan is established for a period of up to 36 months or, if the documentation collected in the case files indicates that the bankrupt has caused their insolvency or significantly increased its degree intentionally or as a result of gross negligence, this period may be extended to up to 7 years.
The repayment plan specifies the part of the debt and the period in which this part of the debt is to be repaid by the bankrupt as well as the part of the debt that is subject to cancellation. In exceptional situations, it may be shortened or extended. The repayment plan may change if the financial situation of the Bankrupt changes significantly.
Ultimately, it is the court that determines Bankrupt's repayment plan. The court is not bound by either the draft repayment plan established by the Trustee or the position of the bankrupt. The court takes into account the economic possibilities of the Bankrupt and his private life situation. As a rule, the repayment plan is established for a period of 36 months, but there are exceptions:
- If it is established during the proceedings that the Bankrupt will repay at least PLN 70% of his liabilities, the repayment plan cannot be longer than 12 months
- If it is determined during the proceedings that the Bankrupt will repay at least 50% of his liabilities, the repayment plan cannot be longer than 24 months
- If during the proceedings it is established that the bankrupt caused his situation intentionally or he demonstrates gross negligence, the court may decide to extend the repayment plan to a maximum of 84 months.
- If the financial situation of the Bankrupt clearly indicates that he is unable to implement any repayment plan, the Court may rule that no repayment plan be established. Then the Bankrupt is discharged of debt on the date the decision on termination of bankruptcy proceedings becomes final.
Summary
How long does consumer bankruptcy last? There is no way to answer this question unequivocally, because each person's situation is different, which means that the authorities must perform appropriate duties. The actual bankruptcy proceedings - i.e. without the execution of a repayment plan - should be completed within six months, assuming that the Bankrupt cooperates with the authorities of the proceedings and does everything to ensure that the proceedings are completed quickly.
At this point, it is worth recalling and emphasizing that:
- Comprehensive arrangement of your affairs before filing for bankruptcy;
- submitting a complete and well-considered bankruptcy petition;
- no assets that can be sold as part of the proceedings;
- proper cooperation with the trustee during the proceedings;
may have a positive impact on both the duration of the proceedings and its outcome in the form of complete write-off of the bankrupt's liabilities.
Therefore, it is worth considering using the help of professionals who will advise you on how to prepare for the bankruptcy proceedings themselves, how to write an appropriate bankruptcy petition, and what situations the debtor should be prepared for during bankruptcy and what to expect after it ends.
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