The change came in 2008. Insolvency Act No. 182/2006 Coll. about bankruptcy and ways of solving it , which allowed the indebted people to file for personal bankruptcy or debt relief .
This solution is relatively advantageous for both debtors and creditors
A debtor at risk of seizure of property will not lose property and thus the bottom of the debt spiral will not fall. On the contrary, her spin stops and the relieved man has a chance to start again. But debt relief is not for everyone:
- Personal bankruptcy can only be declared by people who have debts with at least two creditors.
- The debtor must be behind the repayment for more than 30 days.
- Debt relief does not apply to mortgages and other collateralised loans.
- The debtor must have work.
Debt relief will all debts disappear? Myth!
Personal bankruptcy is only a solution for honest debtors who want to settle their debts. If the debtor comes to the regional court and applies for debt relief, he must have, in addition to the spouse’s consent, a specific plan to deal with his situation.
If the court approves the personal bankruptcy, the debtor is facing a five-year process , during which only the so-called unforgettable minimum must be sufficient to live . It undertakes to repay at least 30% of the amount due within five years.
But his debts no longer grow and if he meets all the conditions, in five years he will face a new start with a clean shield.
Creditors have the key word
Creditors who agree to debt relief usually know that the execution of property would not receive the money back. However, the personal bankruptcy of the debtor guarantees at least 30% of the amount due . Since it is their money, they have the right to decide in what form the debtor will repay.
This is done at a meeting convened by the court. Here, creditors publicly vote whether they require the sale of all your movable property or repayment according to the repayment schedule .
Neither option is just tempting. Repayments mean that the debtor will hand over all his income beyond the subsistence minimum for the next five years. The regulation also applies to inheritance and any winnings.
Beware of debt relief companies
The strict rules of personal bankruptcy discourage many debtors, who then seek solutions from debt relief companies. However, as we have already written above, only the regional court can make real debt relief .
Debt relief companies are private firms that offer help, but may actually be more harmful. Their most common “solution” is to set up a repayment schedule that creditors allegedly approve. But it has two hooks:
- Debt relief companies act primarily as an expensive intermediary between you and the lender. From your repayments they keep the percentage to themselves.
- Creditors usually do not want to work with debt relief companies.
Therefore, we recommend avoiding the debt relief companies in an arch and choosing personal bankruptcy as a last resort. First of all, you should try to solve the unpleasant situation yourself. How to read in our series on the fight against the debt spiral .