Insolvency Act Amendment 2024: What Applies to Debt Relief

Shortening of the Debt Relief Period to 3 Years

The most significant change brought about by the approved amendment to the Insolvency Act under Czech legislation[1] is the shortening of the debt relief period through a repayment schedule with the sale of assets from the current 5 years to 3 years. Under the previous regulation, a debtor could complete debt relief after only 3 years only if they paid unsecured creditors at least 60% of their claims within this period, or if they belonged to one of the special groups (old-age pensioners, second- or third-degree disabled persons, and debtors whose debts arose at least two-thirds before reaching the age of 18). The amendment will enter into force on the first day of the calendar month following its publication in the Collection of Laws.

The three-year period will now apply to all debtors in debt relief under a repayment schedule, not just those who pay at least 60% of their debts, or special groups. To be discharged from paying the remaining claims, it will be sufficient that the debt relief was not cancelled within 3 years of its approval and that the debtor fulfilled all essential obligations arising from the debt relief throughout this period. The law introduces a presumption that the debtor has fulfilled their obligations if they achieved the expected level of satisfaction of unsecured creditors, which the insolvency court determines in the decision approving the debt relief, taking into account their abilities, possibilities, and property circumstances.[2] An exception is made for debtors who were granted discharge in the last 20 years before filing the petition for debt relief – for them, the debt relief period will be 5 years (Section 412a(3) of the Insolvency Act, as amended). However, this rule does not apply to the first subsequent debt relief of debtors who obtained discharge in proceedings initiated before the effective date of the amendment.

For debtors, this means a faster return to normal economic life, but at the same time, higher demands on their activity throughout the debt relief period. Creditors must expect to receive payments from debt relief for a shorter period, and it can be anticipated that their total recovery will be lower in many cases. It will be all the more important for them to monitor whether the debtor is fulfilling their obligations – in the event of their breach, the insolvency court may extend the debt relief period (see below).

Abolition of the Statutory Presumption of Debt Relief Completion

Another key change is the abolition of the presumption of completion of debt relief upon flat-rate satisfaction of unsecured creditors in an amount corresponding to at least 30% of their claims. Instead, an individual assessment of each case will be applied, taking into account the debtor's financial situation and their ability and capacity to repay their liabilities.[3] Thus, the recovery that must be achieved to obtain discharge will no longer have any fixed limit.

Debtor's Information Obligation

Instead of the current 6 months, debtors will now be required to inform the insolvency court of their income every 3 months [4] and cooperate with the insolvency trustee in selling their assets that form part of the estate.[5]

Furthermore, the court will now take into account whether the debtor does not refuse more advantageous job opportunities and property benefits and whether they do not undertake unreasonable financial risks. If the debtor does not apply for registration in the job seekers' register within 15 days after losing employment, the legislator introduces a rebuttable presumption for this situation that the debtor is not properly fulfilling their obligation to seek income.[6]

Possibility of Repaying Debts from the Non-Seizable Amount

The law will now allow debtors applying for debt relief through a repayment schedule with the sale of assets to repay debts to their creditors also from the non-seizable part of their income. Such payment will require a written declaration by the debtor, declaring that this procedure will not jeopardize the satisfaction of their basic needs or the needs of persons dependent on them.[7]

Other Changes

• The period during which it is not possible to re-enter debt relief is extended from the original 10 to 12 years.[8]
• A new obligation is introduced for debtors' employers and credit providers to cooperate with the insolvency trustee and provide them with the necessary documents.[9]
• The period for deleting a debtor discharged by the insolvency court from paying claims from the insolvency register is shortened from 5 years to 3 years.[10]
• The insolvency court is given the opportunity to extend the duration of debt relief by up to 12 months in the event of a breach of the debtor's essential obligations (for reasons worthy of special consideration, the period can be extended by up to another 6 months).[11]
• From October 1, 2026, a central registry of wage deductions is introduced, in which wage deductions and other income deductions related to enforcement are recorded.[12]

Application of the Amendment Only to New Proceedings

It is important to mention that this amendment will apply only to new insolvency proceedings initiated after its entry into force and effect. Existing cases will continue to be assessed under the old rules, which is intended to ensure legal certainty and stability for all parties involved.

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[1] The approved law was sent for publication in the Collection of Laws on August 8, 2024.

[2] See Section 412a(1)(b) of the Insolvency Act (as amended).

[3] See Section 412a(1)(b) in conjunction with Section 412(4) of the Insolvency Act (as amended).

[4] See Section 412(1)(d) of the Insolvency Act (as amended).

[5] See Section 412(2) of the Insolvency Act (as amended).

[6] See Section 412(4) of the Insolvency Act (as amended).

[7] See Section 391(3) in conjunction with Section 409(1) of the Insolvency Act (as amended).

[8] See Section 395(3) of the Insolvency Act (as amended).

[9] See Section 43(1) of the Insolvency Act (as amended).

[10] See Section 425(2) of the Insolvency Act (as amended).

[11] See Section 412b(6) of the Insolvency Act (as amended).

[12] See Section 125b of Act No. 120/2001 Coll., Enforcement Procedure Code, effective from October 1, 2026.