Last year over 6.5 thousand. people declared consumer bankruptcy. It is one fifth more than in 2017 and three times more than in 2015. Most of the bankrupts are inhabited by the Mazowieckie, Śląskie and Małopolskie voivodships. Every fourth person declaring bankruptcy is between 36-45 years of age, the majority of whom are women. This is by no means a result of the BIK and BIG report “InfoMonitor” 1 . Therefore, every debtor with cons on the balance must have a good plan for debt relief and repayment of his creditors. Here’s what should be in it!
Consumer bankruptcy is the first step out of debt
Consumer bankruptcy is a judicial procedure that applies to natural persons not related to their business. Which means that it can only be used by those who do not actually have the means to pay their current bills or liabilities, and even to make basic purchases. According to the regulations – a person who declares bankruptcy may also receive money for renting real estate for a period of one or two years. In addition – such a debtor has the right to ask the court to determine the so-called the repayment plan of the creditors ‘, for which it has a maximum of 36 months, i.e. three years.
What is extremely important is the fact that persons who declare bankruptcy are not excluded from paying certain benefits. These include: alimony, compensation and fines. In addition, all damages and redress obligations are still in force.
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The road to bankruptcy is visible in the KRD!
Bankruptcy is often the only way for the debtor to stand up, and for creditors – a chance to recover money. Worse, when some of them use this solution to get rid of problems and at the same time … responsibility. At present – people who have taken out new loans and who have no funds to repay can not count on debt relief. It is also worth mentioning that every second consumer declaring consumer bankruptcy was previously listed in the National Debt Register as a debtor. In addition, all bankrupts appearing in the database have on their account, after at least 2-3 unpaid liabilities – and their total debt is over PLN 100 million!
Pursuant to art. 491 of the Bankruptcy Law of 28/02/2003 – the court dismisses the bankruptcy petition if the debtor led to its insolvency or substantially increased its degree intentionally or as a result of gross bankruptcy 2 . However, this is going to change in the near future. In 2019, more liberalized procedures are planned to enter into force. First of all, they are to enable debt restructuring, including those consumers who have become insolvent due to deliberate action. In this situation, it will be possible to extend the payment period for receivables, and hence the greater probability that they will reach creditors. After all, the key and overriding purpose of bankruptcy proceedings is to lengthen the insolvent bankrupt and effectively blame dictation! 3
I want to pay off the debt = the repayment plan of the creditors!
Being aware of the fact that you have debt and can say firmly: “I want to get out of debt!” Is the most important step – to which your family must also be convinced. Because without the support of loved ones and the discipline in spending, it will be difficult to overcome the barrier of financial problems. Therefore, when you file for consumer bankruptcy and it is recognized in the course of the proceedings – then you can apply for the so-called Plan for the Repayment of Creditors, which is decided by the competent commercial court. However, before this happens, it must reach the final stage of liquidation of bankruptcy proceedings.
According to art. 491/7 Bankruptcy Law – the final repayment plan can not take place earlier than after leaving the detached one-family house or a flat. This is mainly due to the assumption that real estate is the primary source of satisfaction for creditors’ claims. That is why – only after they have been monetised, you can determine the size of unpaid receivables. Moreover – s AD issue a decision on establishing the plan to repay creditors of the bankrupt, determining to what extent and at what time, no more than five years, fallen is obliged to pay off debts unsatisfied based on the division plan and what part of the obligations of a bankrupt, after the repayment plan creditors will decommitted. The plan of repayment of the creditors includes all the liabilities of the bankrupt up to the date of its determination.
What if bankrupt does not have property and the court does not share it? It is also obvious that if the bankrupt does not receive any income and is unable to take up any gainful employment due to his medical condition, the judge-commissioner discontinues his obligations without setting a repayment plan for the creditors. However, these are extremely exceptional situations and have no consequences on the part of the debtor.
This bankrupt is asking for a repayment plan!
This debtor is obliged to submit an application regarding the repayment plan! According to the law – the court is not entitled to adjudicate in this respect ex officio. In addition, the authority is not bound by the bankrupt’s application as to the content of the creditors’ repayment plan and may set repayment terms more favorable to the creditors if the creditor requests it 4 .
Despite everything – before determining the repayment schedule – the competent court listens to the bankrupt, creditor and receiver. Here – the bankrupt has the opportunity to present his version of events and the current situation, as well as to propose the amount of installments along with their repayment dates. In this case, it is worth remembering that the court may or may not consider the applicant’s position. Similarly, creditors have the opportunity to present their reasons and proposals for a repayment plan – for which the debtor has the right to lodge a complaint! However, if the group of creditors is large – the court has no obligation to interrogate each individual. All they need to do is submit a written statement.
Setting a repayment schedule is the end of bankruptcy proceedings!
It is also worth mentioning that with the announcement of the repayment plan, the function of the receiver and the judge-commissioner expires! Which means that the bankrupt has the right to re-manage his property and pay for work. However – during the implementation of the plan – the debtor can not perform any legal actions regarding his assets, which could further undermine his finances. Supervision over the repayment schedule is then in the hands of the creditor and the bankruptcy court.
Debt repayment plan – how long can it be spread over?
Contrary to the prevailing opinion and the opinion – the schedule of repayment of bankrupt’s liabilities is planned for a maximum of 36 months – but it may well last even for a month. The repayment plan of the creditors is determined by the court and depends on the debtor’s life situation. The judicial authority shall take into account:
- Possibilities of a financial bankrupt,
- The amount of debt and the possibility of repayment,
- The costs it devotes to the maintenance of family members, including housing needs,
- Health-related needs, including treatment, rehabilitation or various types of therapies.
This is more specifically mentioned in art. 491/15 Bankruptcy law:
- In the decision on determining the plan for repayment of creditors, the court determines to what extent and at what time, not more than thirty-six months , the bankrupt is obliged to pay liabilities recognized on the list of claims, not executed in the course of the proceedings on the basis of division plans, and what part of the bankrupt’s liabilities incurred before the bankruptcy day will be discontinued after the repayment plan has been completed.
- Liabilities arising after the bankruptcy and not performed in the course of proceedings taken into account in the plan to repay creditors in full, with their repayment can be made in installments for a period no longer than provided for in the implementation of the plan of repayment believes linen and 5 .
Thus, repayments for individual creditors are fixed in monthly proportional installments. As a rule, their height does not change until the plan is implemented.
What debts does the repayment schedule cover?
What is important – only certain bankrupt obligations may be covered by the Repayment Plan of Creditors. They are long:
- Established before the declaration of bankruptcy and approved on the list of claims
- Established after the declaration of bankruptcy and not carried out in the course of the bankruptcy proceedings – they must be repaid in full until the plan is finished!
- Costs incurred as a result of bankruptcy proceedings – they must be paid in full until the plan ends!
In turn, a creditor who does not claim the rights to his payment will not be accepted by the judge-commissioner on the list of creditors. Consequently, the debt will not be repaid under the Repayment Plan of the Creditors, and the probability of its recovery will be decidedly lower.
The repayment plan for creditors does not pay off all liabilities!
Hardly anyone knows – but the repayment schedule, according to the plan of creditors, does not assume full repayment of all liabilities, but only parts of them! Of course – this solution is not excluded. However, most often, as part of the plan, only a fraction of what belongs to the creditor is regulated. In this light, therefore, it is not only a debt collection function, but also an educational one.
What’s more – if they fail for the entire repayment period, they will pay their dues in the time set by the court, the rest of their debt will be canceled. The bankrupt is entitled to appeal against any decision of the judicial authority. Most often, however, they are rejected and the court upholds its previous position – unless exceptional circumstances have taken place earlier. Consideration of complaints also extends the duration of bankruptcy proceedings.
What are the effects of the plan?
- During the implementation of the Creditors’ Repayment Plan, it is unacceptable to initiate enforcement proceedings against liabilities that arose before its determination. An exception are non-amortizable receivables, e.g. maintenance obligations or compensation damages,
- Setting a repayment schedule does not violate creditors’ rights towards the bankrupt and its co-debtors. This means that the creditor may as well demand repayment of the entire debt from the guarantor or co-debtor of the bankrupt,
- The creditor can also claim their debts with a mortgage, lien, pledge, lien and tax maritime mortgage if they were established on the property of a person inside eciej 6 .
Obligations of the bankrupt during the Repayment Plan of Creditors:
- The most important obligation of the bankrupt when implementing the plan is to pay repayments, as stipulated in the court order,
- The fallen is obliged to submit annual reports on fulfilling his obligations. It must show in them the income earned, the amounts settled, as well as purchased assets with a value exceeding the average monthly remuneration,
- The debtor has a ban on legal actions that may reduce his ability to continue repayment according to plan,
- It also has a ban on concealing its actual property and taking legal actions that result in damage to the creditor.
Repeal from any of the entries makes the debtor lose the right to further debt relief!
Change of the creditors’ repayment plan – in what circumstances?
According to art. 491/19 Bankruptcy law may change or abrogate the Creditors’ Repayment Plan. If the debtor’s situation has been significantly improved – both he and each of the creditors may submit a request to change the repayment schedule. Higher monthly incomes or higher remuneration for the benefit of the bankrupt plays a key role here .
In the event of a significant improvement in the assets of the bankrupt in the period of the repayment plan resulting from reasons other than an increase in remuneration for work or income derived from the bankrupt’s personally performed activities, each of the creditors and bankrupt may apply for a change of the creditors’ repayment plan. The court rules on the change of the creditors ‘repayment plan after hearing the bankrupt and creditor covered by the creditors’ repayment plan. The decision may be appealed against 7 .
On the other hand, if the bankrupt’s financial situation deteriorates , the court may, at his / her request, change the repayment plan. In addition , the court may extend the repayment date of the claim for a further period not exceeding eighteen months . The court’s decision may be appealed against, and a cassation complaint may be filed against the court of the second instance. However, if financial problems are of a lasting nature – the court may also overrule the repayment plan of the creditors and redeem the bankrupt’s non-performance obligations referred to in art. 491 15 a decision on setting a repayment plan for creditors 1-3. The court’s decision may be appealed against, and the cassation appeal may be brought against the order of the court of second instance .
Completion of the repayment plan
Therefore, after fulfilling the duties resulting from the repayment schedule – the court finally issues a decision on the statement of execution of the plan for repayment of the creditors and cancellation of the remaining part of the liabilities. Thus, the bankrupt obtains long-waited debt.
Just remember one thing – once you get out of debt, you can not lose your guard! Therefore, always try to have a financial surplus on your balance. However, above all prevent further crises and simply start saving!