The latest amendment to Act No. 7/2005 Coll. on Bankruptcy and Restructuring has introduced several substantive changes to debt relief for individuals (i.e., personal bankruptcy). The changes should address practical needs and make personal bankruptcy more accessible to debtors.

Under the new rules, debtors – individuals (both entrepreneurs and non-entrepreneurs) will be able to obtain relief from all or part of their debts by one of two options: by filing for bankruptcy or through a repayment plan. The debtor will be able to do so only once in ten years from the moment of declaration of bankruptcy or confirmation of the repayment plan.

It is mandatory for the debtor to be represented in the proceedings by an attorney-at-law or the Legal Aid Center.

The debtor will be required to repay certain specified types of debts (so-called non-dischargeable debts) even after debt relief. Such categories of debts include, for example, debts arising from liability for injuries to a person or for damage willfully caused by the debtor, debts for child support, a monetary penalty provided for under the Criminal Code, etc.

The affected creditor may seek annulment of the debtor’s debt relief within six years of the declaration of bankruptcy or confirmation of the repayment plan, provided the creditor proves that the debtor did not act with honest intentions when applying for debt relief. The debtor does not have an honest intention if, for example, the debtor has intentionally become insolvent in order to be eligible to file for debt relief; or, when incurring debts, the debtor relied on the fact that he would settle his debts by bankruptcy or a repayment plan; or, without a valid reason, the debtor fails to duly and timely comply with the repayment plan as determined by the court.

To protect debtors from losing their homes, the amendment has also introduced a so-called exempted value of property (homestead exemption). The debtor who has filed for personal bankruptcy will be able to keep a certain amount in order to pay, for example, his rent.