How to declare consumer bankruptcy for the second time? Regulations and court practice

Consumer bankruptcy is an important tool for individuals not running a business activity, who have found themselves in a difficult financial situation. The purpose of this mechanism is to enable debtors to start a new life without financial burdens, by writing off some or all of their debts. However, in practice, the question arises: is it possible for the same person to declare consumer bankruptcy again? The answer to this question requires an analysis of the current provisions of bankruptcy law and court decisions.

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Legal Basis for Consumer Bankruptcy

Consumer bankruptcy was introduced into the Polish legal system by the Act of 5 December 2008 amending the Bankruptcy and Restructuring Law and certain other acts. Since then, the provisions concerning consumer bankruptcy have been amended several times in order to simplify the procedure and increase the availability of this solution for debtors.

Currently, the basic legal act regulating consumer bankruptcy is the Act of 28 February 2003 - Bankruptcy Law (Journal of Laws of 2022, item 1520, as amended). According to art. 491¹ of the Act, consumer bankruptcy applies to natural persons who do not conduct business activity and who have become insolvent.

Possibility of re-declaring consumer bankruptcy

According to the applicable regulations, there are no formal obstacles for a person who has already declared consumer bankruptcy, submitted an application for re-declaration of bankruptcy. However, this possibility is limited by certain conditions and circumstances that the court takes into account when considering such a motion.

Grounds for declaring bankruptcy

In order for the court to declare consumer bankruptcy, the following conditions must be met:

1. Debtor's insolvency: According to Article 11 paragraph 1 of the Bankruptcy Law, a debtor is insolvent if he fails to meet his due pecuniary obligations.
2. Consumer status: The debtor must be a natural person not conducting business activity at the time of submitting the application.

If these conditions are met, the court declares consumer bankruptcy, unless there are negative conditions specified in the Act.

Negative premises

Bankruptcy law provides for situations in which the court may dismiss a bankruptcy petition despite the positive conditions being met. Such conditions include, among others:

• Debtor's action with the intention of harming creditors: If the debtor has intentionally caused his insolvency or increased its degree, the court may dismiss the application.
• Improper conduct in previous bankruptcy proceedings: If, within the last 10 years prior to filing the application, the debtor had already been declared bankrupt and his conduct in that proceeding was improper (e.g. he did not cooperate with the trustee, hid assets), the court may dismiss the new application.

It is worth noting that the amendment to the Bankruptcy Law of March 24, 2020 abolished some negative premises, which made it easier to access consumer bankruptcy. However, the court still has the option to refuse to declare bankruptcy if it finds that the debtor has abused the law.

Practical aspects of re-declaring bankruptcy

In practice, re-declaring consumer bankruptcy is possible, but requires a thorough analysis of the debtor's situation and the history of their previous bankruptcy proceedings. The court will examine whether the debtor is not abusing the institution of bankruptcy and whether their conduct in the previous proceedings was in accordance with the law and the principles of social coexistence.

Grace period

Although the law does not specify a specific period that must elapse between the end of the previous bankruptcy proceedings and the filing of a new application, in practice courts may take into account whether sufficient time has elapsed since the previous proceedings to consider that the debtor is again in a state of insolvency. difficult financial situation regardless of his will.

Considerations of equity and humanity

In exceptional cases, the court may take into account the considerations of fairness and humanity when considering the application for re-declaration of bankruptcy. For example, if the debtor has become insolvent again due to circumstances beyond his will, such as serious illness, loss of job or other accidental events, the court may take these factors into account. In such cases, despite the previous declaration of bankruptcy, the court may find that re-declaration of bankruptcy is justified.

Impact of prior proceedings on renewed application

Although the law does not prohibit a re-filing for personal bankruptcy, previous proceedings may affect the court's decision. If the debtor failed to cooperate with the trustee in the previous proceedings, hid assets or otherwise abused the institution of bankruptcy, the court may be more skeptical of the new application. On the other hand, if the debtor has been faithfully implementing the repayment plan and his insolvency is due to new circumstances beyond his control, the court may grant a renewed application. ​

Refusal to establish a creditor repayment plan – analysis of Article 491^14a Bankruptcy law

In the context of the renewed declaration of consumer bankruptcy, Article 491 is of great importance.^14a Bankruptcy Law, which provides for the possibility of refusing to establish a repayment plan for creditors or to write off the debt of the bankrupt without establishing such a plan. This provision is a safeguard mechanism designed to prevent the abuse of bankruptcy by debtors acting in bad faith.

Grounds for refusing to establish a repayment plan

In accordance with Article 491^14a section 1 of the Bankruptcy Law, the court shall issue a decision refusing to establish a creditor repayment plan or to cancel the bankrupt's liabilities without establishing a creditor repayment plan if:

1. The bankrupt has led to his insolvency or significantly increased its degree intentionally, in particular by squandering part of the assets and intentionally failing to settle due liabilities
2. In the period of ten years prior to the date of filing a bankruptcy petition, bankruptcy proceedings were conducted against the bankrupt in which all or part of his liabilities were written off.

It is worth noting that the court may refrain from refusing to establish a repayment plan if it is justified by equity or humanitarian considerations. This means that even if the above conditions are met, the court has the possibility to take into account the individual situation of the debtor and make a decision that is favorable to him.

Consequences of refusing to establish a repayment plan

Refusal to establish a creditor repayment plan means that the bankruptcy proceedings end without granting the bankrupt debt relief. In practice, this means that the debtor is left with unpaid liabilities that are not were discontinued during the proceedings. Such a situation can lead to further financial problems and make it difficult for the debtor to return to normal functioning in society.

Meaning of Article 491^14a for re-declaration of bankruptcy

In the context of the renewed declaration of consumer bankruptcy, Article 491^14a acts as a filter, which aims to eliminate cases of abuse of the institution of bankruptcy. Debtors who have used consumer bankruptcy in the past and had their debts discharged must take into account the possibility of refusing to establish a repayment plan in the event of a new proceeding, if ten years have not passed since the previous debt discharge. In addition, deliberate insolvency may result in a refusal to grant debt discharge

On the other hand, this provision gives the court the possibility to take into account special circumstances and grant debt relief despite the fulfilment of the grounds for refusal, if there are reasons of equity or humanity in favour of it. Thanks to this, it is possible to approach each case individually and take into account the life situation of the debtor.

Conclusions

In summary, Polish bankruptcy law allows for the possibility of re-declaring consumer bankruptcy. However, the circumstances that led to the repeated insolvency and the debtor's conduct in the previous bankruptcy proceedings are of key importance. The court analyses the debtor's individual situation each time, taking into account both formal requirements and considerations of fairness and humanity. Therefore, before filing a new application for consumer bankruptcy, it is worth consulting a lawyer specializing in bankruptcy law to assess the chances of a positive outcome of the case