Тhe draft of The personal insolvency act and its objectives

Тhe draft of The personal insolvency act and its objectives
Nov. 09, 2022
The enforcement proceedings against an insolvent debtor often include tedious, highly cost-consuming ineffectual stages both for the debtor and creditor such as stipulation on mechanisms for voluntary compliance, оrder for payment procedure or opposition proceedings, enforcement proceedings, including assignments of debts. Drawing up the draft text of The personal insolvency act has the objective of resolving the aforesaid issue by implementation of legal framework intended to fill the legislative gap and govern the personal insolvency proceedings in accordance with the EU legislation, the national legal system's characteristics and the  public expectations.
This draft law regulates the insolvency proceedings for natural persons who are insolvent debtors acting in good faith and want their obligations to the creditors to be satisfied within the same judicial proceedings.
In addition it should be noted that individuals  exercising a trade, business, craft or profession are excluded from the personal scope of this draft law.
This shall be a voluntary process, which is brought before the Court by an  application by the debtor in good faith and its aim is to ensure that his creditors receive reasonable satisfaction. The draft law provides that the liable person is in good faith when he or she enters into commitments according to his or her financial situation and incomes and does not cause harm by his or her own actions to the creditors’ interests either intentionally or negligently.
In order to initiate the insolvency procedure the debtor shall not only be insolvent and in good faith, but also shall have assets sufficient to cover the procedural costs and meet at least partly his or her obligations to the creditors.
The proceedings themselves, similar to the insolvency proceedings within the meaning of The commercial law, are carried out before the district court, an insolvency practitioner is appointed, the creditors submit their claims, а schedule of liabilities shall be drawn up, the bankruptcy Estate estate shall be formed which shall not include the non-seizable assets of the debtor, repayment plan shall also be drawn up.
Within the proceeding guarantees are provided  for obtaining debtor life’s necessities by determination of maintenance payments in the amount of at least one minimum wage as well as certain compulsory execution.
There is also an opportunity set out for extinguishing debtor’s obligations within 3-year period after the approval of repayment plan or the drawing-up of an inventory of his or her property in case he/she has covered the incurred costs and met at least partly his obligations to the creditors. In case the debtor in good faith appears to have no sequester property the obligations shall be redeemed after the expiry of a 10-year period.
Such draft law would address undoubtedly the long-standing issue relating to the lack of a national framework for personal insolvency proceedings in the Republic of Bulgaria by introducing a qualitatively  new legal institute.
The adoption of this law would also lead to the elimination or reduction of the current regulatory burden relating to imposition of significant costs to debtors and creditors of the court proceedings and enforcement proceedings which are often prolonged as well as to jurisdiction and judicial enforcement optimisation by consideration of all claims within the same procedure.
We would note, however, that it is crucial for the proceedings implementation the recourse to them not to pursue any abuse of rights. Such courses of actions by the debtors- individuals would inevitably have generally negative impact on the Bulgarian financial sector, therefore thе diligent and good faith reasonable application of the procedure shall be guaranteed.