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Attorney Milena Nowicka
What Are the Advantages of Consumer Bankruptcy?
The Possibility of Realistic Repayment of Part of the Debts, Discharge of the Remaining Liabilities, and a Fresh Financial Start After Declaring Consumer Bankruptcy
Suspension of Enforcement Proceedings and Debt Collection Activities in Bankruptcy Proceedings
Financial Reorganization Following Consumer Bankruptcy
Disadvantages of Consumer Bankruptcy
Sale of Your Assets by the Bankruptcy Trustee
Limitations on Privacy and Trustee Supervision During Bankruptcy Proceedings
Restrictions During the Repayment Plan Period in Consumer Bankruptcy
Inclusion of Spouses’ Joint Property in the Bankruptcy Estate
Advantages and Disadvantages of Declaring Consumer Bankruptcy – Key Information for You
In 2024, the number of declared consumer bankruptcies reached a record high of as many as 21,000. This demonstrates how many individuals have found themselves in an extremely difficult financial situation, with no realistic possibility of repaying their debts, forcing them to seek a last-resort solution. For many, consumer bankruptcy becomes the only path to debt discharge, suspension of enforcement proceedings, and an end to long-standing financial problems. On the other hand, it is not a solution that should be used for every financial difficulty, as it involves serious restrictions and sacrifices for years to come. It is an important decision, and therefore one that should be carefully considered and, ideally, discussed with an attorney.
Consumer bankruptcy offers a number of benefits for indebted individuals.
The greatest advantage of consumer bankruptcy is the realistic possibility of full or partial discharge of debts.
What does this look like in practice? After consumer bankruptcy is declared, debt repayment takes place according to a so-called repayment plan—a schedule for settling liabilities that is tailored to your current financial situation.
Installments under such a plan are usually significantly lower than previous monthly obligations, as they are calculated in a way that makes repayment feasible. As a result, it often happens that not all debts are repaid during the term of the plan. However, if you perform the plan diligently, the remaining portion of the debt is discharged. This allows you to free yourself from the burden of prior obligations.
One of the most important consequences of declaring bankruptcy is the automatic suspension of enforcement proceedings. This means that your assets will not be seized by a bailiff during the bankruptcy process.
Creditors lose the ability to contact the debtor directly, and all actions are carried out solely through the bankruptcy trustee. New enforcement proceedings may not be initiated.
For this reason, declaring consumer bankruptcy provides immediate relief to individuals who have previously been exposed to intensive debt collection efforts and repeated creditor demands.
Consumer bankruptcy requires the submission of a detailed list of liabilities, income, and assets.
As a result, many individuals gain a comprehensive overview of their financial situation and are able to make rational decisions regarding asset management in the future. This process often leads to a lasting change in financial habits, which constitutes an additional benefit.
Consumer bankruptcy is not a solution that offers only advantages. If it were, far more people would choose this option. Anyone considering bankruptcy must be aware of its negative consequences, of which there are at least several.
After consumer bankruptcy is declared, the debtor’s entire estate becomes part of the so-called bankruptcy estate, which is managed by the trustee. The trustee begins selling the assets, and the proceeds are first used to cover the costs of the bankruptcy proceedings and then to partially satisfy creditor claims.
In practice, this means that almost all assets are lost, subject to certain statutory exceptions.
If the estate includes residential property, it will usually also be sold by the trustee. This does not mean, however, that you will immediately lose your home. From the proceeds of the sale, a sum will be set aside to allow you and your family to rent an apartment or house for a period of 12 to 24 months.
This time is intended to enable you to stabilize your financial situation and secure appropriate living conditions.
In bankruptcy proceedings, the trustee is granted broad supervisory powers.
The trustee analyzes income and expenses, financial flows, contracts concluded by the debtor, as well as the debtor’s family and professional situation.
The trustee may also demand explanations regarding the causes of insolvency. For many individuals, this constitutes a psychological and organizational burden.
Moreover, if during the consumer bankruptcy process the trustee finds that you are deliberately disposing of assets, appropriate actions may be taken:
If the court establishes a creditor repayment plan, the debtor must comply with specific rules, such as a prohibition on taking out new loans, an obligation to inform the court or trustee of increased income, and the requirement to maintain a reasonable level of expenses.
Violation of these rules may even result in the revocation of the repayment plan, where a permanent inability to fulfill the obligations set out in the plan arises for reasons beyond the debtor’s control.
Upon declaration of consumer bankruptcy, a regime of separation of marital property automatically arises between spouses. The bankruptcy estate managed by the trustee includes not only your personal property but also the former marital joint property.
In such a situation, the spouse may assert a claim to their share of the property (usually half of the value of jointly owned assets), but this claim is treated in the same manner as claims of other creditors. In practice, this means that the spouse will most likely recover only a portion of the amount due.
Consumer bankruptcy is a legal instrument that may give indebted individuals a chance for a fresh financial start by enabling partial or full discharge of debts and protection against enforcement proceedings.
At the same time, it entails certain limitations—it may involve the loss of assets and requires strict compliance with legal regulations. Therefore, even if you belong to the group of persons eligible to declare consumer bankruptcy, it does not necessarily mean that you should choose this path.
Such a decision has a profound impact on your future, which is why it should not be made independently. It is advisable to seek the assistance of an attorney specializing in commercial or insolvency law, who will assess your financial situation on an individual basis and advise which solution is the most reasonable in your specific circumstances.
