Insolvency of natural persons – Part II

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Measures to replenish the bankruptcy estate

Similar to the Commercial act, the insolvency administrator may terminate the debtor’s contracts that are not performed in whole or in part by giving 15 days’ notice.

Within three days of taking office, the insolvency administrator takes an inventory of the debtor’s immovable and movable property, money, valuables, securities, contracts, etc., claims and property in the possession of third parties. The inventory shall be approved by the court by order, and a further inventory may be taken if other property is discovered.

Where there is a risk of dissipation, destruction or concealment of property, the insolvency court may order the sealing of premises, equipment, vehicles and other property in which the debtor’s property is stored. The sealing shall be carried out by a private bailiff and a record of the sealing shall be sent to the court.

Repayment plan

The repayment plan aims at deferring or rescheduling payments, partially or fully forgiving debts and carrying out other actions and transactions with the debtor’s assets aimed at satisfying creditors. The plan shall contain the extent to which the claims included in the list approved by the court at the time of submission of the plan have been satisfied, the manner and timing of payment, and the guarantees for the satisfaction of those claims and of disputed disallowed claims, as well as the practical arrangements for its implementation.

The court shall admit the plan by order. The plan shall be accepted by a decision of the meeting of creditors if more than half of the accepted claims have voted in favour of it, and the acceptance shall be published in the insolvency register. The court shall confirm the plan adopted by decision if the requirements of the law have been complied with.

The decision shall terminate the insolvency proceedings, appoint an insolvency administrator, order the debtor to pay the claims not paid on the due date and arising after the date of opening of the proceedings which are included in an additional list and determine the property which the debtor may dispose of only by prior decision of the administrator or the court, as the case may be.

The implementation of the plan shall be supervised by the insolvency administrator, if so provided in the plan itself, and the debtor shall be under an obligation to notify the insolvency administrator of any circumstances which may affect the implementation of the plan.

The confirmation of the plan shall suspend the limitation period under Article 110 of the Obligations and contracts act for claims that arose before the date of the decision to open the proceedings, and if the plan has deferred or postponed their enforcement, a new limitation period shall begin to run from the date of the due date.

Bankruptcy and realisation of assets

If a repayment plan is not proposed within the statutory period or the proceedings are reopened for non-compliance, the court shall declare the debtor bankrupt. In addition, the decision imposes a general restraint and seizure of the debtor’s property and disqualifies the debtor from managing and disposing of property included in the bankruptcy estate. The court shall order the commencement of the bankruptcy assets’ realisation and the distribution of the realised assets.

The decision shall be published in the insolvency register and shall be immediately enforceable and effective against all. All pecuniary and non-pecuniary debts of the debtor shall become enforceable from the date of the bankruptcy order, and a non-pecuniary debt shall be converted into a pecuniary debt at its market value on the date of the order.

The sale of property rights from the bankruptcy estate is carried out by the administrator after the court’s authorisation. The provisions of Chapter Forty-six of the Commercial Law – Sale of Property shall apply.

Once sufficient funds have been collected in the bankruptcy estate, the administrator shall draw up an account for the distribution of the amounts available to the creditors in accordance with the order, privileges and securities. The account shall be published in the insolvency register and the debtor or any of the creditors may object to it in writing within 14 days, after which the court shall approve it, making the appropriate changes of its own motion or following an objection.

Termination of the proceedings

Proceedings shall be terminated by a decision of the court where, after the opening of the proceedings, it is established that any of the conditions for opening the proceedings, e.g. good faith of the debtor, are not met. It shall also be terminated in the event of an approved repayment plan, exhaustion of the bankruptcy estate or repayment of debts, and in the event of an out-of-court settlement between creditors and the debtor.

Claims and rights not asserted in the insolvency proceedings shall be extinguished by the decision terminating the proceedings.

Repayment of the debtor’s debts

The law provides that the debts of the insolvent debtor, which are included in the list of admitted claims approved by the court, shall be discharged upon the expiry of a 3-year period from the entry into force of the decision approving the repayment plan or, in the absence thereof, from the date of the first inventory of the debtor’s assets.

The debtor must also have paid the costs of the proceedings, satisfied at least part of the claims, provided that all of his sequestrable property has served to satisfy the creditors of the bankruptcy estate and there are no grounds for bad faith on his part.

The law also provides for the extinguishment of creditors’ claims in the hypothesis where the bona fide insolvent debtor is unable to pay the costs and all his sequestrable property has served to satisfy the creditors. In that case, the limitation period is 5 years and starts to run from the entry into force of the decision staying the proceedings, the reopening of which has not been requested by the debtor within one year of the stay due to the lack of assets to cover the initial costs.

Notwithstanding the expiry of the limitation period, in both cases referred to above, the debtor’s obligations to satisfy claims secured by a mortgage, fines, maintenance, tort and those arising after the opening of the proceedings but remaining unsatisfied are not extinguished.


The proposed draft law seeks to fill the lack of a positive legal framework for the insolvency of natural persons. However, its limited personal scope, as well as the relatively complex proceedings, are likely to lead to problems in its application in practice.

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