Minister proposes legislation to help the bankrupt get out of debt

The Czech minister of justice is putting forward a new amendment to the bankruptcy law aimed at helping people to climb out of debt and make a fresh start. The legislation would make it easier for them to enter the debt relief process – and could mean they will be free of debt more quickly than at present.

Robert Pelikán, photo: Prokop Havel, Czech Radio

The minister of justice, Robert Pelikán of ANO, has laid out plans to amend the Czech Republic’s law on insolvency so as to allow more people who go bankrupt to climb out of debt.

Introducing his proposals, the minister said that at present many people were unable to access the state’s debt relief system. This despite the fact that some of them owe less than those who are able to benefit from the scheme.

The reason for this: The process can’t begin without the permission of creditors, unless it appears the debtor is going to settle at least 30 percent of their debt. However, that 30 percent may currently also include crippling interest and fines.

Photo: num_skyman, FreeDigitalPhotos.net

Mr. Pelikán explained how things should be different in future.

“Everybody will be allowed to enter the debt relief process, without regard to the size of their debt, on condition that they do not pursue dishonest intentions – meaning borrowing money with no intention of paying it back. A second condition is that they have not been gone through the debt relief process in the previous seven years.”

If people do enter the debt relief process, they will lose any property they own exceeding the value of CZK 100,000. The courts will then sell off those assets and the bankrupt individual will pay off the remaining debt from their income, with only that part which is not liable to confiscation left to them.

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If this does not sound very attractive, Mr. Pelikán also outlined how those who go bust might benefit from his plans.

“The motivational element is this: If they manage to settle at least half of what they owe to creditors, the whole process can end in just three years. If they settle 30 percent, like today, it will be five years. And if they don’t manage to pay back 30 percent, it will be seven years.”

Another novelty included in Mr. Pelikán’s proposals is that a debtor will have to deal with only one bankruptcy administrator, no matter how many separate distraint proceedings they face.

The planned amendment will now go to other government departments ahead of a cabinet discussion on the matter.