According to experts, insufficient awareness of debt relief rules and stress are the main obstacles preventing people from getting out of debt. More than 40 percent of debtors have never heard of debt relief or are unfamiliar with its basic conditions. Almost half don’t realize that the main benefit of this process is the forgiveness of remaining debt. Two-thirds of indebted individuals are unaware that after the amendment to the insolvency law, it’s no longer necessary to repay 30 percent of obligations, said Pavla Aschermannová, Chairwoman of the Consortium of Debt Counseling Centers of the Czech Republic, following a Debt Platform meeting in Olomouc.
The number of new insolvency proceedings is growing by only 12 percent year-on-year, partly due to this lack of knowledge, while tens of thousands of people could take advantage of this option annually if they had sufficient information. “It’s sad how many people remain in debt because they don’t know there’s a way out. They’re often mentally and physically exhausted, and half show symptoms of moderate depression or anxiety,” Aschermannová noted. According to Daniel Prokop from the research agency PAQ Research, indebted people often live below the income poverty line or in precarious housing situations and fear they won’t manage the payments or that the court won’t discharge their debts at the end of the relief process.
In recent years, approximately 20,000 people have entered debt relief annually. Experts estimate that up to ten times more people could use it in the next few years. Aschermannová believes it’s necessary to find new ways to reach people, for example through banks or post offices, and contact them when they’re ready to utilize debt relief.
Moving forward, the consortium plans to expand the network of debt counseling centers to all regions, making free counseling as accessible as possible. The regional level, according to the organization, determines whether people get the necessary information and professional help in time. “We want to reach as many over-indebted people as possible and motivate them to address their situation,” added Aschermannová.
Debt relief is one of the options for resolving insolvency. An amendment to the insolvency law, in effect since last autumn, shortens the debt relief period from five years to three. Advocates argue that over-indebted people have gained an opportunity to escape the debt trap more quickly and return to the legal economy. Critics, however, contend that the change has disproportionately worsened creditors’ positions.