Opportunity for debt relief. Amendment of the Bankruptcy Law

OPPORTUNITY FOR DEBT RELIEF. AMENDMENT OFTHEBANKRUPTCY LAW

The Act of 30 August 2019, amending the Bankruptcy Law and certain other acts, introduced a number of changes, including the liberalization of the processes of debt relief for natural persons.

The possibility of remission of obligations of consumers and entrepreneurs who are natural persons has been unified. The act also provides for the possibility of debt relief for the bankrupt by establishing a creditor repayment plan, for the remission of liabilities without establishing a creditor repayment plan and conditional remission of liabilities without establishing a creditor repayment plan.

Debt relief proceedings may be commenced within thirty days from the announcement of the decision on closing the insolvency proceedings. A respective application may be filed by the bankrupt who is a natural person. The court shall determine to what extent and within what period the bankrupt shall be obliged to pay the claims, included in the list of claims, which have not been satisfied in the course of the bankruptcy proceedings.

Iga Marcinkowska,

associate in the Law Firm “Chudzik i Wspólnicy Radcowie Prawni” sp.p. www.chudzik.pl The court shall also determine what part of the bankrupt's liabilities shall be remitted after the creditors repayment plan has been implemented. Above all, however, the court shall assess how the state of insolvency or a significant increase of its level has arisen - whether the bankrupt has led to this deliberately, intentionally, as a result of gross negligence, or in an unintentional manner. Prior to 24 March 2020, if the bankrupt caused the state of insolvency or a significant increase of its level culpably or through gross negligence, their application to establish a creditor repayment plan and to remit the remainder of the liabilities would always be rejected. Currently, the court will only dismiss such an application, if the bankrupt has deliberately led to the state of insolvency or a substantial increase of the debt level. The intentional nature of the bankrupt's actions or gross negligence, on the other hand, shall result in an extension of the period for which the creditor repayment plan will be established. When deciding on the period to repay creditors, the court shall also take into account activities of the bankrupt in the execution of that plan. During the creditor repayment plan implementing period, the bankrupt shall be prohibited to perform legal actions which could impair their ability to implement the repayment plan. Only in case of a reasonable excuse may the court give its consent to such action or approve it retrospectively. Additionally, by the end of April each year, the bankrupt shall submit to the court a report on the execution of the creditor repayment plan for the previous calendar year. What is important, as a rule, during the period of execution of the creditors' repayment plan, no enforcement proceedings can be instituted against the bankrupt regarding claims which had arisen before the bankruptcy was declared. Remission of obligations without a formulating creditor repayment plan is possible where the personal situation of the bankrupt clearly indicates that they are permanently unable to make any payments under a creditor repayment plan. It should be noted that the legislator has not made this type of debt relief conditional upon the insolvency or an increase of its level being caused by intentional actions or gross negligence. The only reason for debt remission without a repayment plan is the debtor's lasting situation of permanent inability to pay their creditors. The permanent inability within the meaning of that provision covers such debtor's personal situation which does not promise to improve. It does not, however, include temporary difficulties, even if they have persisted for a long time. An application for remission of debts without a creditor repayment plan shall be dismissed by the court, if the bankrupt is found to have intentionally caused the insolvency or a significant increase of debt. In a situation where the bankrupt is unable to make any repayments under the creditor repayment plan, and such inability is not of a permanent nature, it is possible to use the institution of conditional remission without a creditor repayment plan. In such a case, the obligations of the bankrupt shall be definitively remitted after a period of five years from the date on which the order for conditional debt relief without a repayment plan becomes final, unless the bank rupt or one of their creditors submits an application for a repayment plan within that period. During that 5-year period, the bankrupt shall be subject to obligations corresponding to those of a bankrupt implementing the repayment plan. Bankrupt's failure to submit a timely report on their property and professional situation and providing false information therein (in particular, concealing income earned and assets acquired), committing any act that deteriorates the bankrupt's property situation without the prior or retrospective consent of the court, concealing the assets, a and legally binding acknowledgement that the bankrupt has committed an act to the detriment of creditors, shall result in the court cancelling the decision on conditional remission of liabilities without creditor repayment plan. The court may withhold from the cancellation only if the bankrupt's default is of an insignificant nature or due to reasonable grounds of equity or humanitarian grounds. To sum up the presented options of debt relief for natural persons being and not being a sole trader, it should be noted that the introduced changes primarily aim to serve the bankrupts. The inter ests of the creditor and the chances to satisfy their claims seem to be set aside Yet, the liberalisation of the bankruptcy law in respect of debt recovery for insolvent natural persons may bring about an increased interest in these processes in practice. Author:

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