- Published: 13.03.2015.
Government endorses personal bankruptcy bill
The government on Thursday endorsed a consumer bankruptcy bill in an attempt to give over-indebted citizens a chance for a fresh start, but Justice Minister Orsat Miljenic said this was "not a magic wand" but a difficult procedure both for debtors and creditors.
All insolvent consumers could file for bankruptcy if for three straight months they have not been able to pay their debts which exceed HRK 30,000.
Aside from individuals, business owners could also file for personal bankruptcy, although the Bankruptcy Law applies to them, if they have less than 20 creditors, debts below HRK 100,000, if they do not owe their employees money, and if no bankruptcy or pre-bankruptcy settlement proceedings have been filed.
Miljenic said this was a new institute in Croatia, although many other European Union countries have it. He said it offered debtors who could not pay their debts a fresh start and creditors a possibility to collect some of their claims.
He said this was an attempt to strike a balance between debtors who could not service their liabilities because of the crisis or other reasons and creditors who often incited citizens to incur debts.
He warned, however, that personal bankruptcy "is not a magic wand" and that no one's debt would be immediately written off, but that one's entire estate would be used to pay off the debt. After that, a debtor starts from scratch, but it is very difficult to get at that, "both for debtors and for creditors. Let's not raise false expectations, this isn't a simple matter."
Miljenic said it was very important that debtors themselves could file for bankruptcy. A creditor can in no way force a debtor to file for personal bankruptcy without the debtor's consent, he added.
Prime Minister Zoran Milanovic said the personal bankruptcy bill was a civilised step towards an agreement so as to avoid going to court and the costs that entailed.
Before filing for bankruptcy, a debtor would first have to attempt to settle with the creditors out of court, before a Financial Agency advisory body, but if no agreement is reached, the proceedings would continue in court, with the consumer getting another chance to settle with the creditors, Miljenic said.
If no court settlement is reached, the court would appoint a trustee to divide the consumer's estate and represent a bridge between the court, the consumer and the creditors.
Debts would be written off for debtors without assets or job prospects, while employed debtors would retain money only for the bare necessities, the rest going towards paying off their debts. The amount for the bare necessities would be decided by a court.
When it comes to real estate, a debtor could stay in a property if they have no other place to live for the duration of the bankruptcy proceedings. After that, it would be seen how much of the debt has been paid off and decided if the property would be sold.
Consumers who file for bankruptcy would have to report to the trustee about any changes to their assets for a period ranging from one to five years, to be decided by a court, depending on their assets and debts. Unemployed consumers would also have to try to get a job.
(Hina)