For a long time, bankruptcy was reserved only for companies. However, it can now also be used by natural persons who do not conduct business. Who and how can they declare such consumer bankruptcy?
More and more consumer bankruptcies are announced annually. In 2015, it was about 2,000 cases, in 2016 it was twice as much. In the first quarter of 2017, 1311 people declared bankruptcy. For those people who can not cope alone with the repayment of their obligations, the bankruptcy of the consumer is a very attractive proposition.
What is consumer bankruptcy? Consumer bankruptcy is the reduction or cancellation of debts. Bankruptcy proceedings are carried out in court. However, this is not a solution for everyone, because we should remember that we have to meet certain requirements.
First of all, the court can challenge a bankruptcy petition when debts result from carelessness or gross negligence. Bankruptcy is possible to be announced when the debt is the result of random events, independent of us, for example, a sudden deterioration of the financial situation, illness, catastrophe.
The entire bankruptcy process consists of three main stages. The first of these is the recognition of the application, i.e. the so-called proceeding in the subject of the declaration of consumer bankruptcy, the second is bankruptcy proceedings, and the third is the execution of the creditors’ repayment plan.
1. Preparation of the application for bankruptcy
In the beginning, we must file for bankruptcy. Of course, we must first analyze whether such an application will allow us to achieve the expected result.
In the application, we should present our situation fairly – concealing any information may negate our chances for a positive outcome of the case. We can not, among other things, conceal assets. The application must also add appropriate attachments, for example, a certificate of what has affected our situation.
2. The proper bankruptcy proceedings
The next stage is the proper bankruptcy proceedings with the inventory of assets if our application will be considered positively.
At that time, the bankruptcy estate that comes from our property is also designated. The debts are repaid from the bankruptcy estate. It may include, inter alia, our remuneration, real estate, and movables. Of course, this does not mean that we will be deprived of money for life – in our hands will be the amount of the minimum net salary.
However, we can lose a flat. Then, the court may assign us the amount of the average rent for the apartment in our town. We can also avoid home auctioning when we prove that we will be able to pay off the debt without liquidating the property.
3. Preparation of the creditors’ repayment plan
It may turn out that notwithstanding the sale of the debtor’s assets, not all creditors’ claims will be fully satisfied. Then a debt repayment plan is prepared – it can last up to 3 years.
We then repay the creditors from our earnings, but the court can also order that the debt will be redeemed. Then the creditors will not be able to demand repayment of “old” debts from us.