On 31 March 2009, a new concept of consumer bankruptcy will be introduced, making it possible for individual debtors who are not engaged in business activities to be declared bankrupt.

The key points of the new law are:

  • individuals who have become insolvent due to extraordinary circumstances beyond their control may be declared bankrupt once every ten years. This is not available to those who have been dismissed from work through their own fault or with their consent
  • bankruptcy may only be declared at the individual's request (creditors may not file a bankruptcy petition)
  • in principle, the bankruptcy proceedings are the same as those for liquidating the bankruptcy estate in bankruptcy proceedings for entrepreneurs
  • the bankruptcy estate includes the debtors' residence, which would be sold and the proceeds used to satisfy creditors and to provide the debtor with the equivalent of 12 months' average rent to rent an apartment
  • the debtor can, if the bankruptcy judge consents, liquidate his own bankruptcy estate under the supervision of a receiver
  • a distribution plan is used to satisfy creditors in a consistent manner out of the bankruptcy estate. Any claims which are not satisfied from the distribution plan are then, at the debtor's request, included in a repayment schedule set by the court, which also sets out the portion of claims which is to be cancelled once the repayment schedule has been followed
  • in principle, debtors have five years to repay claims under the repayment schedule during which time they cannot conclude any transactions at law that go beyond ordinary management
  • in certain circumstances, the repayment schedule can be changed at the debtor's or creditors' request. If debtors fail to perform their obligations under the repayment schedule, creditors can ask the court to reverse the repayment schedule and discontinue the bankruptcy proceedings. In this situation none of the creditors' claims against the debtor will be cancelled.

Law: amendments to the Bankruptcy and Recovery Law

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The original publication date for this article was 25/03/2009.