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Attorney Milena Nowicka
What Is Consumer Bankruptcy?
Who Is Consumer Bankruptcy Intended For?
Requirement 1: Consumer Status at the Time of Filing for Consumer Bankruptcy
Requirement 2: Insolvency
Does the Cause of Debt Affect the Ability to Declare Consumer Bankruptcy?
Why Is It Worth Seeking the Assistance of an Attorney Before Deciding to File for Consumer Bankruptcy?
Are you wondering whether you can take advantage of consumer bankruptcy in order to get rid of your debts? This is a question asked by many Poles struggling with financial difficulties. Consumer bankruptcy is a lawful procedure that allows individuals to break free from the debt spiral and obtain a fresh financial start. However, not everyone is eligible—statutory provisions set out a number of conditions that must be met.
Consumer bankruptcy is a legal procedure governed by the Bankruptcy Law Act (referred to therein as the “bankruptcy of a natural person”). It enables the full or partial discharge of debts that a given person is unable to repay under the existing terms.
It is a path to a financial “reset” when your financial situation has become unmanageable. However, it requires significant sacrifices on your part. Moreover, it entails specific consequences for you and even for your spouse, if you share joint marital property.
It is therefore not the case that once consumer bankruptcy is declared, all debts simply “disappear.” This is only the beginning of the process. Your assets then come under the administration of a trustee (receiver). The trustee liquidates them (with certain statutory exceptions), and the proceeds are distributed among creditors and used to cover the costs of the proceedings. If you are employed, a portion of your remuneration is also allocated to creditors.
Subsequently, as a rule, a repayment plan is established—that is, a realistic plan for settling debts, adjusted to your financial capabilities. It usually provides that for a period of 3 to 5 years you will repay debts in accordance with the established rules. If you comply with the plan and perform your other statutory obligations, the court will discharge the remaining portion of the debts.
Consumer bankruptcy was designed for natural persons who do not conduct business activity (i.e., consumers) and who are insolvent.
The term “consumer” is key. You may benefit from this procedure only if, at the time of filing the petition, you are not conducting business activity. It is worth noting, however, that a person who was previously entered in the CEIDG register as an entrepreneur may also declare consumer bankruptcy. Such a person must first terminate their business activity, as consumer status is assessed as of the date of filing the petition.
Consumer bankruptcy is intended for insolvent individuals. An insolvent person is one who fails to perform their due monetary obligations. For the sake of simplification, the law also introduces a legal presumption: if the delay in payment exceeds three months, the person is presumed to be insolvent.
Example: Marta works as a teacher. She has a mortgage on her apartment, a car loan, and three credit cards that she used for daily expenses. After a divorce and being left to support two children on her own, she is unable to repay all installments. She has been in arrears for over four months. Marta may file a petition for consumer bankruptcy because she meets both requirements—she has the status of a consumer and is insolvent (she has not repaid her debts for more than three months).
In articles written several years ago, you may encounter information suggesting that a court will not declare consumer bankruptcy if the debtor is at fault for their insolvency (e.g., as a result of recklessly taking out successive loans). Such a provision did indeed exist in the past, but this changed following an amendment to the Bankruptcy Law.
Currently, when declaring consumer bankruptcy, the court takes into account only two elements: insolvency and consumer status. Whether the insolvency is culpable is irrelevant at this stage.
However, it will affect the duration of the repayment plan referred to above. Under the law, if a consumer who has declared bankruptcy caused their insolvency or significantly increased its extent intentionally or through gross negligence, the repayment plan may not be set for a period shorter than 36 months and may last up to 84 months.
In certain cases, it may also prevent the establishment of such a plan or the discharge of debts altogether—if the consumer intentionally caused their insolvency or increased its extent, for example by squandering their assets or deliberately failing to repay debts.
Consumer bankruptcy is an effective debt-relief instrument for natural persons who have found themselves in a difficult financial situation. However, it is not a simple method of becoming debt-free without making any sacrifices.
On the contrary—the decision to declare bankruptcy affects your assets, your personal situation in the coming years, and even the assets of your spouse. For this reason, the decision to file a bankruptcy petition should be consulted with an attorney specializing in consumer bankruptcy. This will allow you to ensure that it is the appropriate solution for your situation and to obtain professional assistance in the proper preparation and filing of the petition.
