The new Customer Insolvency Act is coming into force. This new law allows people to declare bankruptcy when the indebted person is not able to pay debts owing to circumstances that are beyond his or her control. Konrad Gruner from the Office of Competition and Consumer Protection (UOKiK) explains that in order to make use of the new regulations one has to submit an application to court which determines a five-year plan for the repayment of the debt. In order to do so the possessions of the debtor will be sold. If the consumer has a flat, it will be sold and then the court will assign a part of the money received from the sale to the debtor enabling him or her to rent a flat for 12 months. The rest of the money will go to the creditors.
The Act is subject to numerous restrictions that indicate who will be able to benefit from the right to consumer insolvency. More precisely, only people who became insolvent due to circumstances beyond their control will be able to exercise this right. Among the limitations put on the debtor during the five-year plan are, for example, inability to take out a loan, purchase anything in instalments or use a credit card. Moreover, the person who declared insolvency is obliged to submit annual reports concerning the repayment of the debt. The repayment plan may be changed if the financial situation of the debtor improves. This refers to a situation when, for instance, the debtor inherits something. However, the amount of the repaid instalment will not change if the financial situation of the debtor improves due to his or her work, i.e. in case of a pay rise. A person can make use of the Customer Insolvency Act once every ten years.