Recent changes to insolvency proceedings in the Czech Republic, intended to simplify debt repayment, have unexpectedly complicated matters for debtors. While October’s amendments aimed to expedite the process of settling debts and executions, some insolvency courts have begun imposing hefty advance payments on claim reviews, creating new obstacles for those seeking debt relief.
By law, debtors are required to pay a monthly fee of 2,178 Czech crowns (or 3,267 crowns for married couples) to the insolvency administrator until their debt relief is approved. However, some courts are now demanding additional payments of 1,000 to 5,000 crowns monthly for claim review costs, potentially lasting up to six months before debt relief approval.
Radek Hábl from the Institute for Prevention and Resolution of Over-indebtedness warns that this new practice could create a significant barrier to entering insolvency proceedings. He argues that the fee for reviewing claims should be paid after the debt relief process, as was previously the case.
The situation is further exacerbated by an increase in the fee for reviewing each claim, which has risen from 250 to 1,000 crowns. This substantial hike is particularly burdensome for debtors with multiple claims, leading some to reconsider entering the debt relief process altogether due to financial constraints.
While the Ministry of Justice acknowledges the delicate balance struck in the new legislation, they maintain that debtors are not obligated to pay the full amount of claim review fees upfront. Nevertheless, they suggest it’s in the debtor’s best interest to voluntarily pay these costs as soon as possible, potentially shortening their repayment period by two months.
Despite these complications, the amended insolvency law has brought some positive changes. The debt relief period has been reduced from five to three years for all debtors, a benefit previously limited to seniors, people with severe disabilities, and those with childhood debts. The amendment also allows for temporary suspension of debt relief for up to one year and ensures continuous alimony payments during the process.