Банкеръ Weekly

Briefs

Indebtedness Bill in Bulgaria Raises Questions

The Excessive Indebtedness Act, as Prepared by the Ministry of Justice in Bulgaria caused very many comments, even before being posted for public comment on the website of the ministry. It seems that different opinions on it have been provoked both by the statements of Justice Minister Zinaida Zlatanova in the media, and the different variants of the project, which have been circulating between journalists, financiers and lawyers.


How does one reach the conclusion that he or she is over-indebted? Obviously, this is not something that dawns on you in the morning. One thing is, however, to be over-indebted, and another to be insolvent. The bill does not answer the question if a person who has found it difficult to service its debts for three or six months should be declared over-indebted. What if this individual possesses two apartments filled with expensive furniture, maybe a villa, two plots of land, two cars (whose value far exceeds the debt) although the person can not or does not want to service the debt?


It turns out that in such cases one should rely on statements of court-appointed appraisers. The only problem is that such investigation of all the circumstances is not provided for in any of the draft bills developed by the Ministry of Justice. It says something else - this citizen shall submit to the district court an application for over-indebtedness, filling in a special declaration form. In it the person has to describe all his or her property, transactions committed on the acquisition and sale of property and property within one year before the application, as well as the personal income he or she receives. Based on this information, the district court should consider whether to accept the request, and this is done... within three days. To the work-overloaded district courts - especially in Sofia - three days are extremely insufficient time to verify the accuracy of the information that a debtor has provided in this declaration. This immediately implies that unscrupulous individuals could abuse such a procedure to get rid of debt payment. Much better would be if the project had envisaged that the court shall rule on such requests for over-indebtedness, having received a reasoned opinion from specialist assessors and the advice of all creditors listed in the application of the citizen.


But that three days are not enough and even three weeks will hardly suffice.


Entirely different topic is whether the debtor has described in his application all creditors. This should also be investigated by a magistrate before any decision. But how will they verify this fact? There is a way. For example, if such requests are posted in a special register of the Registry Agency. Then the creditors may be given a term of 14 working days in which to send to the court all their claims to the debtor. However, all these procedures should be spelled out in the bill.


Furthermore, the relatively light regime of this indebtedness procedure creates serious concerns that the actual cases will benefit unscrupulous major debtors, not the people who really need such protection. Three years of control over income and assets will not startle people with debts of over 200,000 levs, especially if after this period all their unpaid bills will be considered automatically settled. As to their property, which the bill suggest be seized and sold, this problem is easily surmountable. It is enough if the property is transferred to relatives, offshore companies, law firms... to name all possible ways.


Necessarily, the norm must devise clear texts to regulate what happens to the family property when one of the spouses seeks protection from creditors. For example, if a man does so, whether he needs to request the consent to his wife or not? The bill puts many more questions but offers few clear answers. And the media are hardly the ones who can give them.


The BANKER

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