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Consumer bankruptcy

Consumer bankruptcy

As a legal concept, consumer bankruptcy was given a new life on 31 December 2014, when the Bankruptcy Law was amended. Only in 2015 there were over 2,100 cases of consumer bankruptcy, which is a gigantic increase compared to 60 cases in 5 years of the previous legislation. The number of consumer bankruptcy cases will probably exceed 3,000 in 2016 and continue to grow over the next years.
As we already know, this new version of consumer bankruptcy has proved effective and an invaluable help to thousands of indebted consumers. When used in a correct way, it allows the debtor to get free of their debts and go back to everyday life, without a need for debt enforcement or the never-ending disputes with creditors. What is more, in certain cases one can become free from debts contracted in the course of business that has already been closed.
How does consumer bankruptcy work?
An insolvent debtor files an application that specifies all circumstances of the insolvency, discloses their all assets and names each and every creditor they have. Unless insolvency is caused or worsened by wilful misconduct or gross negligence (e.g. due to business decisions which would be irrational even if made by an average person), such a consumer is declared bankrupt by a court. Obviously, there are also other arguments against consumer bankruptcy (grounds for dismissal of a petition), e.g. if the consumer was supposed to file a bankruptcy petition as an entrepreneur within the last 10 years prior to filing one as a consumer, but failed to do so on time. However, most of such obstacles do not necessarily put an end to one’s chances of going bankrupt. Debtors can be saved e.g. by reasons of fairness or humanitarian considerations providing grounds for proceedings. We strive to justify any such reasons already in the bankruptcy petition.
The aim of consumer bankruptcy is to help the debtor and make it possible to go back to normal life, whereas satisfying creditors’ is of secondary importance. Unfortunately, this process is not painless. Consumer bankruptcy essentially is the same as liquidation bankruptcy, meaning that as a result all assets of a debtor are liquidated and the funds proceeding from liquidation are allocated by the official receiver to pay off the creditors. Throughout the proceedings (9 to 18 months on average), it is the official receiver that manages the debtor’s assets rather than the debtor (to the same extent as a bailiff, meaning that not everything is subject to attachment). In the next step, the court draws up a repayment plan covering up to 36 months, which obliges the debtor to pay specific sums to their creditors on a monthly basis. What is important is that the plan is prepared bearing in mind debtor’s earnings rather than the outstanding debt. Nevertheless, any consumer considering going bankrupt must be prepared to lose all their assets and for several years of limitations in normal functioning. However, this is the price for becoming free of old debts and a chance to go back to everyday life after a stormy period.
Furthermore, according to current legislation, consumer bankruptcy may be declared in the case of a person who has no property whatsoever and cannot even afford the court fees. In such a case all costs are borne by the State Treasury.
What do we do?
✓ We analyse each situation and help our Clients choose the best way of restructuring consumer debts and debts relating to earlier business activity of the debtor.
✓ We assist in drafting a bankruptcy petition and all schedules thereto, identify threats, show ways of remedying a tight situation.
✓ We represent our Clients throughout the entire bankruptcy proceedings (approx. 9 to 18 months), help them reach an agreement with official receivers, take care of legitimate interests of debtors (e.g. ensure that no more is enforced against the debtor than lawfully permissible), draft relevant procedural documents.
✓ We share our experience. So far we have successfully handled several dozen of consumer bankruptcy cases, sometimes very complicated, bringing about a positive outcome in a series of proceedings.
Piotr Zimmerman
Starszy wspólnik,
radca prawny,
doradca restrukturyzacyjny


piotr.zimmerman@zimmerman.com.pl