Czech Government Passes New Insolvency Law: Shorter Debt Relief for Individuals

The Czech government has passed a new law that will shorten the length of debt relief for individuals. According to the new law, the length of debt relief will be reduced from five to three years for all individuals. Only seniors and people with a second or third degree of disability are granted three years.

The new law aims to help individuals escape debt more quickly, return to the legal economy, and reintegrate into everyday life. The Ministry of Justice stated that the law would relieve vulnerable groups, such as seniors, people with disabilities, and single mothers.

While some have welcomed the new law, it has also faced criticism from creditors and businesses. The Czech Creditors Association has argued that wage deductions have decreased significantly over the past few years, from around 6,000 crowns per month five years ago to two-thirds less today.

The new law will also abolish the 30% threshold for satisfying creditors’ claims, which has been replaced by an average monthly payment determined by the debtor’s income potential. This change has been resisted by the business community, who argue that it will harm private and public creditors.

Despite the criticism, the shorter debt relief period is a trend seen in the European Union, with most countries having a three-year debt relief period for both businesses and consumers. Advocates of the new law argue that creditors will not be harmed, as they will receive the same payment regardless of the length of the debt relief period.

The new law will introduce further changes, including relief for single mothers seeking debt relief and the continuous payment of child support until a court decision is made. The law must still be approved by parliament and signed by the president before it comes into effect in January.