Credit after consumer bankruptcy – is it possible?
Is it possible to take loan after bankruptcy?
The number of Poles who declare consumer bankruptcy increases every year, and there are many indications that the law will be even milder for debtors. We check why this is happening and whether it is possible to take a loan after bankruptcy.
The growing number of consumer bankruptcies in Poland is the result of the liberalization of the Bankruptcy and Rehabilitation Act of 2014. Meanwhile, the Ministry of Justice announces that the law will be even more lenient for private individuals who are unable to pay their debts, which worries specialists from the financial industry. Analysts are afraid that Poles will loosen their financial discipline even more.
Meanwhile, sound financial management is already difficult for many of us. In a study conducted for the purposes of the Irresponsible Project, 35% of respondents said that they had a problem with settling the debt or that they were in arrears with repayment of some financial liability. A similar percentage of respondents replied that they had happened in debt, not sure if they would have the means to repay this amount. A quarter admitted taking loans for things they didn’t really need.
Consumer bankruptcy – what is that?
Consumer bankruptcy is a court procedure for natural persons who do not run a business (consumers) who have become insolvent. Insolvency is a condition in which the debtor is unable to perform his due monetary obligations ( Article 11 (1) of the Bankruptcy and Rehabilitation Act ) – for example, there is no money for the simultaneous purchase of daily use and repayment of the loan.
Consumer bankruptcy has two main functions:
- debt relief for an insolvent consumer – cancellation of all or part of the consumer’s debts in relation to his creditors, which the consumer is neither able to pay;
- recovery (recovery) of receivables from the insolvent consumer by his creditors.
Filing of a consumer bankruptcy petition
Currently, at the stage of filing for bankruptcy, you must prove to the court that we are unable to pay the debts due to random reasons. Loss of ability to pay financial obligations must also be permanent, but it cannot be the result of intentional act or gross negligence. The court will dismiss the petition for consumer bankruptcy if the debtor has led to his insolvency as a result of intentional action.
It is worth mentioning that after the court’s decision, the debtor’s property (mainly houses, flats, recreational plots or cars) is auctioned off, and the funds obtained are used for the proportional repayment of claims. If the sums obtained from the sale of the debtor’s assets are not sufficient to satisfy all creditors in 100%, the court will additionally establish a repayment plan.
The Ministry of Justice is working on amendments to the act that are supposed to mitigate applicable law. The project creators want the court to investigate only intent and gross negligence when declaring consumer bankruptcy. The circumstances of the emergence of insolvency will be relevant only at the stage of determining the repayment plan of creditors, which means that they will no longer be the basis for rejecting the application for consumer bankruptcy.
| Advantages and disadvantages of consumer bankruptcy | |
|---|---|
| Disadvantages | Advantages |
| Loss of assets – probably all. | Certainty of total indebtedness – cancellation of unpaid liabilities occurs after the court decides a favorable decision and liquidates the debtor’s assets. |
| With the declaration of bankruptcy, all consumer property becomes a “bankruptcy estate”, managed by a trustee appointed by the court – this means that the consumer cannot freely dispose of his property (e.g. sell a car). | Consumer bankruptcy suspends pending enforcement proceedings as well as pending court proceedings. |
| Part of the debtor’s income will be included in the bankruptcy estate and will be transferred to creditors. | The debtor does not have to be afraid of debt collection companies. |
| The procedure of consumer bankruptcy is extremely complex and time-consuming – the court scans all the debtor’s finances. | Mental relief – many people suffer badly from debt, which worsens their health. |
Credit after consumer bankruptcy
No current regulations provide grounds for not granting credit to a person with consumer bankruptcy. However, it should be remembered that after the court declares consumer bankruptcy, we cannot freely manage our own assets. This means that we cannot take equipment on installment or loan without court permission.
Moreover, the practice of banks indicates that it is very difficult to get a loan after the declaration of bankruptcy. – The consequences of a declaration of consumer bankruptcy do not end with the repayment of all creditors. When applying for a loan, e.g. for an apartment, banks use data from the Credit Information Bureau (BIK). After the declaration of consumer bankruptcy, this fact is recorded in BIK and the credit history will appear in the databases for the next 10 years, which in most cases will mean a refusal to grant a loan.
How to avoid consumer bankruptcy?
We advise you above all prudently to make decisions about incurring liabilities. This may be obvious, but sensible management of your own money will help you avoid bankruptcy. Sometimes it is enough to think twice whether we need more installments to save ourselves and our family from stress and the need to declare bankruptcy.