What is consumer bankruptcy and how does it work?

Aktualizacja 24 January 2023

What is consumer bankruptcy and how does it work? These types of questions are asked by a lot of indebted people looking for a way to solve their financial problems. Consumer bankruptcy was introduced into Polish legislation for insolvent persons.

The main purpose of consumer bankruptcy is to liquidate all or part of the debts of the indebted person. The condition for receiving consumer bankruptcy is proving in court that we are unable to pay our debts on our own. In today’s article, we explain in detail what consumer bankruptcy means. We invite you to read carefully!

Consumer bankruptcy – what does it mean?

Consumer bankruptcy is an increasingly popular tool that more and more indebted people reach for every year. Lots of debtors are wondering what consumer bankruptcy means. It is an institution dedicated to all natural persons who do not have their own business and do not perform any function in companies. In addition, such people do not have the appropriate amount of funds to pay off their debts to creditors.

It is worth knowing that the level of insolvency of a particular person is always very carefully verified by the court during the ongoing proceedings. Importantly, court proceedings regarding the declaration of consumer bankruptcy may be initiated both at the request of the debtor and his creditor. For many indebted people, declaring bankruptcy is the only way to free themselves from their obligations once and for all and start all over again. Currently, declaring consumer bankruptcy is so popular also because in 2020 new, favorable regulations regarding this institution entered into force.

What is consumer bankruptcy?

What does consumer bankruptcy mean? It’s a word for court proceedings. An application for initiation of such proceedings is only available to private persons who do not run their own business. Unfortunately, people who are entrepreneurs do not have the opportunity to take advantage of consumer bankruptcy.

Consumer bankruptcy is dedicated only to those private individuals who are insolvent. Their income does not even cover all monthly financial obligations. The purpose of consumer bankruptcy is to discharge all or some part of the debt that the consumer is unable to repay on his own. It is also worth knowing that, in accordance with the applicable guidelines, consumer bankruptcy may only apply to those financial liabilities that a given person incurred before declaring consumer bankruptcy.

Both intentional and unintentional debts are taken into account for the declaration of consumer bankruptcy. For example, if we deliberately got into debt and were aware of the consequences, we also have the right to file a consumer bankruptcy petition with the court. Of course, it should be taken into account that the court will treat such a person in a completely different way than someone who fell into debt due to a serious illness or loss of a job.

Legal changes in the area of declaring consumer bankruptcy

In March 2020, the amended regulations on the rules for declaring consumer bankruptcy came into force. The legislator emphasized that the amendment to the Act is being introduced in order to make the declaration of consumer bankruptcy even easier than before. Creditors were also to feel the effects of the introduction of this law.

The amendment to the regulations was prepared by the Polish Sejm in 2019. The Ministry of Justice has decided to amend the regulations, thanks to which all the procedures related to applying for a declaration of consumer bankruptcy have been maximally simplified.

In the communication of the Ministry of Justice on the amendment, you can find a record that currently over 2 million Poles are struggling with overdue debts. The amendment to the regulations has made filing for consumer bankruptcy much easier than ever before.

What exactly did the amendment to the Consumer Bankruptcy Act introduce? First of all, a person who intends to declare consumer bankruptcy is no longer obliged to talk about the reasons for his insolvency. In addition, debtors now have the right to apply for a settlement with their creditor. If the debtor decides to choose such a solution, he will no longer be obliged to file an application to the court for a declaration of consumer bankruptcy.

The amended regulations also introduced a change regarding what debts may be the basis for granting consumer bankruptcy. Currently, even those people who, of their own, conscious will, decided to incur huge debts can apply for consumer bankruptcy.

We hope that you already know what consumer bankruptcy means. In this article, we have tried to clear all doubts about this broad topic.