Better access to consumer bankruptcy from March 24, 2020

On August 30, 2019, the Polish Parliament adopted the act amending the Act on Bankruptcy Law and some other acts (Journal of Laws of 2019, item 1802), which aims at simplifying the procedure of declaring consumer bankruptcy on the one hand, and on the other broadening access to this legal institution.

Among the many changes introduced by the above amendment, there is the repeal of the entire provision of art. 491⁴ of Bankruptcy Law of 28 February 2003., which laid down the conditions for dismissal by the court of petition for consumer bankruptcy.

Pursuant to the above provision, the court could reject the consumer’s petition for bankruptcy if, among others the debtor has led to his insolvency or significantly increased its degree intentionally or through gross negligence.

As a result, in the course of the proceedings, courts under current regulations were required to examine in detail all the facts that led to the emergence of insolvency or an increase in its degree. If the court, based on the evidence taken, in particular documents and questioning of the consumer – the applicant and any witnesses, came to the conclusion that the consumer intentionally or through gross negligence led to a situation of insolvency (or a significant increase in its degree), the application was dismissed.

However, the amendment to the Bankruptcy Law adopted on August 30, 2019 provides for the repeal of the entire provision of Art. 4914, and as a consequence, courts adjudicating on consumer bankruptcy will have neither the right nor the obligation to make their decision regarding the acceptance or dismissal of an application dependent on the degree of the consumer’s fault in contributing to the state of insolvency.

As a result, access to consumer bankruptcy has increased significantly, because the benefits of this institution are going to be used even by persons who intentionally or through gross negligence led to their insolvency or significantly increased its degree.

The above changes do not mean that the courts will be completely exempted from examining the consumer’s guilt in this respect. This fault will not affect the admissibility of the declaration of bankruptcy itself, but it must be taken into account when determining the repayment plan for creditors, in accordance with the new wording of Art. 491¹⁵ of Bankruptcy Law. If it is established that the bankrupt has led to his insolvency or significantly increased its degree intentionally or through gross negligence, the creditors’ repayment plan cannot be set for a period shorter than thirty six months or longer than eighty four months.

The above amendments to the provisions of the Bankruptcy Law enter into force on March 24, 2020.