A proposal of an amendment to the Insolvency Act should provide an access to the debt relief institute to a wider scope of debtors

A proposal to Act by which Act no. 182/2006 Coll. is to be modified
Status of discussion: 1st reading

The Minister of Justice had presented the proposal of the amendment to the Insolvency Act, which was submitted on 20 March 2018 at the session of the Czech Parliament. This proposal was presented in connection with the solution of practical issues (excessive indebtedness of natural persons, debtors are in debt traps, in a state where claims are impossible to be paid in practice).

By the proposal, it is to be remedied the currently unfavorable situation in terms of the number of persons affected by the execution. There are 863 thousand of persons held in execution, almost half a million citizens have three or more execution proceedings in progress against them, a total of 4.67 million executions are ongoing, 75 executions are started every hour, and CZK 239 billion is now being enforced in execution.

The aim of the proposal is to make the debt relief institute available to a wider scope of debtors. The basic points of the proposal are:

• removal of the 30% repayment threshold in 5 years and rationalization of conditions for providing of consumer’s credits,
• modification of the debtor's obligations in debt relief, with an emphasis on the legitimacy of access to debt relief and payment relief,
• conditions for higher satisfaction of creditors in debt relief by filling of the repayment schedule and strengthening the educational effect of debt relief,
• optimization of the debt-relief legislation in relation to spouses' property and in the case of coordinated debt relief of spouses,
• extension of discretionary powers of the insolvency court when assessing the proposal for authorization of debt relief.

The new arrangement should be especially suitable for honest debtors, which is a debtor who provides all the eligible assets to cover the debts and spends all efforts for repayment of his or her debt during 7 years. A faster debt relief would then be possible for debtors who have repaid at least 50% of their receivables within 3 years. To such debtors, it will be available a combination of their asset sales and repayment schedule.