Oddlužení 2025

What the Insolvency Act Amendment Brings for Creditors

The amendment to the Insolvency Act, effective from 1 October 2024, has shortened the debt relief period from five to three years. At the same time, however, it introduces mechanisms that allow active creditors to achieve higher satisfaction of their claims. A key element is the debtor's so-called personal goal – the expected rate of satisfaction of unsecured creditors, which is determined by the insolvency court when approving the debt relief.

The personal goal is based not only on the debtor's past income, but newly also on their income potential with regard to education, experience, and the labor market situation. For this purpose, the Ministry of Justice has created an information tool with summary data on the income of people in comparable positions.

How to Properly File a Claim in Insolvency Proceedings

Filing a claim in a timely and formally correct manner is a fundamental prerequisite for any satisfaction. For the running of the limitation period, the filing of a claim has the same effects as a lawsuit, starting from the day it reached the insolvency court.

Claims are filed with the insolvency court using the prescribed form from the commencement of the insolvency proceedings until the expiry of the period specified in the decision on bankruptcy. The application must include, in particular:

• the designation of the court and the case file number of the insolvency proceedings,

• identification of the debtor and the creditor,

• the amount of the claim and its accessories,

• the ground for the claim with a description of the facts,

• for secured claims, the designation of the security and documents proving its existence.

Secured vs. Unsecured Creditor

A secured creditor is a creditor whose claim is secured, for example, by a pledge, a right of retention, or a security transfer of a right. A secured creditor is satisfied from the proceeds of the monetization of the collateral and can give instructions to the insolvency trustee regarding the administration and monetization of the secured asset.

Unsecured creditors are satisfied from the debtor's installments or from the monetization of unsecured assets. However, they have important procedural rights – only they vote on the method of debt relief and can file objections against its approval.

Three Time Periods for Active Creditors

The new concept of debt relief gives creditors effective tools, but their utilization requires activity in precisely defined phases of the proceedings.

First Period: Objections to the Approval of Debt Relief

The insolvency trustee prepares a report for debt relief, in which they assess the debtor's income potential. Creditors who voted on the method of debt relief may object to facts that would justify the rejection or dismissal of the debt relief petition, up to the end of the creditors' meeting, or – if no meeting is convened – within 7 days from the publication of the debt relief report in the insolvency register.

Second Period: Appeal Against the Decision Approving Debt Relief

In the decision approving debt relief, the court determines the debtor's personal goal and the amount of installments. Creditors may file an appeal if they believe the personal goal is set too low. However, only a creditor who voted against the adopted method of debt relief can appeal – out of procedural caution, it is therefore advisable to vote this way if you wish to retain the option to appeal.

Third Period: Motion for Punitive Extension of Debt Relief

A new tool is the possibility to propose an extension of the debt relief by up to 18 months if the debtor does not properly fulfill their obligations. The motion can be filed once a year, within a preclusive period of two months from the expiry of every 12 months of performance, and must contain substantiated factual allegations.

Dishonest Intent of the Debtor and Options to Challenge It

The debtor must act honestly throughout the entire debt relief process. Dishonest intent can lead to the rejection of the petition, non-approval, or cancellation of the debt relief. Typical manifestations include:

• concealment of assets,

• intentional reduction of income or working in the grey economy,

• providing false information to the insolvency trustee,

• disadvantageous transactions prior to filing the petition.

Creditors can point out circumstances indicating dishonest intent and propose the cancellation of the debt relief. If the court cancels the debt relief due to dishonest intent, it may decide to resolve the bankruptcy through insolvency (bankruptcy liquidation).

Contestation of Claims and Incidental Disputes

A filed claim can be contested as to its authenticity, amount, or priority by the insolvency trustee, the debtor, or another creditor. Contestation usually leads to an incidental dispute, in which a creditor with an unenforceable claim must seek a determination of its authenticity by filing a lawsuit, usually within 30 days of the review meeting.

Creditor Bodies and Their Powers

Creditors can also exercise their rights through the creditors' meeting and the creditors' committee. The creditors' meeting decides on the most important issues, such as the method of debt relief or the dismissal of the insolvency trustee. The creditors' committee supervises the activities of the trustee, approves certain of their steps, and protects the common interest of the creditors.

Monitoring of Debtors and Preventive Measures

The basis of success is timely information about the commencement of proceedings. The Insolvency Register (ISIR) is publicly accessible, but for a larger number of debtors, automatic monitoring is worthwhile, which alerts to the commencement of proceedings without delay.

Relationship Between Insolvency and Debt Execution

After the commencement of insolvency proceedings, debt execution (distraint) cannot be carried out; the execution formally runs, but no steps aimed at its execution can be taken, and satisfaction is taken over by the insolvency proceedings. Upon fulfillment of the debt relief, the court discharges the debtor from paying the remaining debts, which is a ground for stopping the executions conducted for these claims.

International Element in Insolvency Proceedings

Cross-border insolvency in the EU is regulated by Regulation (EU) 2015/848 on insolvency proceedings. Foreign creditors can file claims in proceedings conducted in the Czech Republic, and thanks to the ARROWS International network, we also resolve claims against debtors abroad.

Final Summary

Shortened debt relief does not automatically mean lower satisfaction for creditors. Those who file their claim in time, vote, file objections or appeals, and monitor the debtor's compliance can obtain more than a passive creditor.

We handle the insolvency agenda daily under Czech legislation – from filings to incidental disputes.