The epidemiological situation in Poland and the world currently affects most aspects of the daily functioning of Poles, and it also creates a major threat to the financial liquidity of many of them. The changes made to consumer bankruptcy can therefore be helpful to those who, in the wake of the pandemic, lose their ability to regulate their obligations.
On 24 March 2020 the amendment of bankruptcy law introduced by Act dated 30 August 2019 amending the Act – Insolvency Law, signed by the President on 6 September 2019.
Faster insolvency proceedings
As a result of the amendment, insolvency proceedings should be shortened. The person declaring the bankruptcy will be able to delay or start implementing the agreed repayment plan, as the cause of the bankruptcy will not be investigated at the initial stage.
As part of the amendment, it was repealed in its entirety Article 4914 Act – Bankruptcy Law, which concerned negative conditions for declaring bankruptcy.
Therefore, there will currently be no grounds for dismissing a bankruptcy application if the debtor has led to his insolvency or significantly increased his degree intentionally or through gross negligence.
The examination aspect of the debtor’s fault in the insurrection of insolvency was shifted to the stage of the establishment of the repayment plan. The cause of insolvency will be investigated only after the bankruptcy has been declared.
It will then be decided whether it is possible to refuse a debt extension, with this possibility limited to a situation of deliberate action aimed at the squandering of assets, i.e. behaviour resulting from the wrong will of the debtor and leading to obvious harm to creditors (e.g.
borrowing with the awareness of its inability to repay and its spending on luxury goods).
Another amendment introduced by the amendment concerns the submission of claims which will be made directly to the syndicate, not to the judge-commissioner, as has been the case so far. This will help speed up bankruptcy proceedings, as the syndicate will not have to wait for the list of claims.
The fallen debtors were protected from sudden loss of shelter. These changes may prove important for many Poles who have now lost their source of earnings and, consequently, the ability to regulate their obligations
Consumer failure also for business operators
Until now, the so-called consumer bankruptcy in Poland could be declared only by natural persons not engaged in economic activity. With the entry into force of the new rules, the debt holders of single-person economic activities will also be able to do so.
Additional security of housing needs
one from the more significant changes from the point of view of the fallen is to secure their housing needs.
As implemented Article 342a(1) Act – Insolvency law, if a natural person is bankrupt and the bankruptcy is composed of a dwelling or a single-family house in which they are resident, and it is necessary to satisfy the housing needs of the fallen and dependants, the sum obtained from its sale shall be released to the fallen amount corresponding to the average rental rent of the dwelling in the same or adjacent locality for a period from twelve to twenty four months.
The amount referred to above shall be determined at the request of the fallen judge-commissioner, who shall take into account the housing needs of the fallen, including the number of dependants, the earnings of the fallen, the sum obtained from the sale of the residential premises or the single-family home, and the opinion of the syndic.
There is a complaint against the decision of the Commissioner-judge on this matter.
Facilitation of agreement with debtors
Moreover, as introduced Article 49125 Act – Bankruptcy law, a debtor who is a natural person who does not carry on an economic activity which has become insolvent, has been given the opportunity to apply to the insolvency court to open proceedings for the conclusion of an arrangement at a meeting of creditors.
In accordance with that provision, the court will take into account the debtor's request to open proceedings for the conclusion of an agreement at a meeting of creditors, or may refer him to that procedure if the debtor's commercial opportunities and his professional situation indicate the ability to cover the costs of the arrangement procedure and the possibility of concluding and implementing the agreement with creditors.
The amendment thus allows debtors to retain the selected assets of their assets.
Better protection of the debtor
In addition, to Article 63 Act – Bankruptcy law added section 1a-1d, on the basis of which, in the event of a declaration of bankruptcy of a natural person whose dependencies are not of other persons, part of the bankruptcy income, including income excluded from the bankruptcy on the basis of section 1 corresponds to the amount 150% amount specified under Article 8(1)(1) Act dated 12 March 2004 Social services.
In the event of the declaration of bankruptcy of a natural person whose dependencies are other persons, part of the bankruptcy income, including income excluded from the bankruptcy, shall also not be included in the bankruptcy balance.
section 1 corresponds to the product of the number of dependants of the fallen and fallen and 150% amount specified under Article 8(1)(2) Act dated 12 March 2004 Social services.
The judge-commissioner at the request of the fallen or syndicate may otherwise determine part of the fallen income which does not fall into bankruptcy according to section 1a and 1b, taking into account the particular needs of the fallen and dependants, including their health, housing needs and their ability to meet them.
According to the changes introduced, the syndication will also be entitled to choose its own way of liquidating the bankruptcy, without the need to obtain the permission of the judge-commissioner to sell. This amendment will therefore reduce the insolvency proceedings and make them more effective.
In summary, the changes will contribute to simplifying and speeding up insolvency proceedings, which is a clear advantage for debtors. The fallen debtors were also protected from sudden loss of shelter. These changes may prove important for many Poles who have now lost their source of earnings and, consequently, their ability to regulate their obligations.
Author: Michał Wasilenko
Lawyer, Senior Associate in the Legal Department, member of the Bar Association in Lublin, graduate of the Faculty of Law and Administration at Maria Curie-Skłodowska University in Lublin. He specializes in commercial and civil law law.