The media regularly report on the problems of people who are not paying their liabilities on time. To allow the financial clinch to break free, the regulations allow the announcement of the so-called consumer bankruptcy. Is it difficult to carry out and is it really a recipe for an effective exit from debts?
There is a widespread belief that the concept of bankruptcy is assigned to the sector of companies and enterprises. However, this is not a complete feeling, because insolvency also affects ordinary people. Private bankruptcy makes it easier for debtors to re-start. Let us return to society without a yoke depressing debt. Unfortunately for this part of the world, bankruptcy is also synonymous with defeat and shameful ineptitude. Societies brought up in the cult of brilliant careers stigmatize the phenomenon of bankruptcy, but are they right?
Opposite hostile opinions, you can put stories of people who have turned a private fiasco into spectacular success. It was thanks to bankruptcy that Walt Disney went to Hollywood, and Henry Ford changed the face of the world’s automotive industry. Donald Trump, billionaire, real estate magnate, current president-elect of the USA, fell down and rose several times. During one of the interviews he said: “The most valuable lesson I received was from failure, not from success .” This is perfectly illustrated by the mentality of people living behind large water. In a country where bankruptcy is not accompanied by the aura of degrading defeat, and the law effectively supports the insolvent debtor. Unfortunately, this approach is far from the regulations applied in the home yard.
At the end of March 2009, consumer bankruptcy was introduced into Polish bankruptcy and reorganization law. Extremely strict regulations, allowing absolute auction of the debtor’s assets, required a thorough change. Therefore, at the beginning of 2015, the current rules assumed a more humanized form. An increasing number of applications for bankruptcy confirmed that the liberalization of regulations was necessary. The scale of the phenomenon may be proved by the fact that in 2015 alone the courts announced over two thousand bankruptcies, when in a few years before the amendment, only 60 were announced.
By definition, consumer bankruptcy is a court proceeding , provided for natural persons who do not run a business activity and become insolvent as a result of certain events. This means that they have permanently lost the ability to regulate their obligations and satisfy basic life needs. Thanks to the bankruptcy proceedings, persons drawn into the spiral of debts receive a chance to reduce or cancel some of their liabilities. This allows for a new start, without the need of many years of struggling with the cumbersome execution of bailiffs.
The first step accompanying the declaration of consumer bankruptcy should be filing an appropriate application in the commercial court of the debtor’s place of residence. The role of the applicant is to present his financial situation and justify the reasons for insolvency. Next, the court assesses whether the debtor’s difficult situation is due to gross negligence or culpable action. A person taking non-reflective commitments will be assessed differently than the debtor who lost financial liquidity as a result of serious illness or job loss .
This application should also be supplemented with a list of assets owned by the consumer. The debtor is obliged to disclose his property with an estimate of all its components. A person applying for bankruptcy should also prepare a list of creditors along with their addresses, the amount of liabilities and payment dates. It is important to provide a fair presentation of the facts, since false data may contribute to the dismissal of the application by the court.
After the court issues the decision on the declaration of bankruptcy, the procedure of liquidation of the debtor’s assets is instituted. At this stage, the trustee joins the process. When working with a trustee, a consumer should not conceal relevant information or hide assets of his property. For that, he should be aware that there is a long list of things that the court can not take away from him . These include personal items, small home appliances or equipment necessary to perform work.
After the in-line inventory has been prepared by the receiver, the debtor’s assets are monetised . The money received from the sale is used to satisfy the claims of the creditors. As a rule, the accumulated funds do not fully cover problematic obligations. In such a situation, the court establishes an additional repayment plan . When assessing the economic condition of the debtor, a schedule is set for the return of the remaining part of the debt. It can also be ruled out that when assessing the financial possibilities of the consumer, the court does not see any prospects for repayment of the debt. It results in the remission of all his debts.
In accordance with the applicable provisions, the repayment plan may not exceed 36 months . A debtor diligently performing his duties has a real chance to cancel other liabilities. If the schedule ends and the court receives a request for remission of further debts, the bankruptcy process is closed. It’s a symbolic moment. A moment when the consumer regains financial freedom.
When assessing the essence of consumer bankruptcy, it is hard to disagree with the opinion that liberalization of regulations was necessary . The amendment of the law made in 2015 is a step in the right direction. The provision of an effective mechanism for the assessment of applicants is crucial for bankruptcy proceedings. After all, not every debtor is guided by bad faith , and insolvency itself may be the result of an unfortunate fall. Aggressive debt collection, pushing the consumer to the lowest levels of the social ladder, is ruinous for all parties to the dispute. Therefore, a man in the rules should have a faithful ally. Especially in moments when he happens to draw a shorter match.