On 4 November 2022, the National Assembly of the Republic of Bulgaria submitted for consideration a draft law on bankruptcy of natural persons. Current legislation does not allow individuals who are insolvent to be declared bankrupt. Insolvent debtors are subject to severe restrictions, stress and worries from financial difficulties and creditors’ expectations. Bona fide debtors who have fallen into a situation of insolvency due to the occurrence of adverse events beyond their foresight and control are particularly vulnerable – temporary or permanent loss of ability to work, health problems, separation in the family, loss of job or property, and others. The financial difficulties of the insolvent debtor also affect his/her family members, including children and persons with special educational and care needs to whom he/she owes maintenance. In case of inability to pay his/her debts, the debtor can only rely on the statutory limitation terms.
Insolvent debtors conduct difficult negotiations for an out-of-court settlement of their debts, become defendants in separate and often multiple lawsuits, endure all kinds of measures in individual enforcement proceedings from various creditors. Organizing a legal defense is often prohibitive for them because it requires paying legal defense costs for each creditor claim, including court costs for each individual proceeding. In addition, it involves a lot of personal time and effort.
Receivables are impaired when they are not serviced and there is a possibility that they will not be collected. These receivables have a negative effect on the security of business turnover, the capital adequacy of credit and financial institutions. The existence of hard-to-collect and uncollectible receivables creates prerequisites for carrying out unregulated forced collection activities by debt collection companies and buyers of receivables, who use influences and methods that are not always in line with the law to motivate citizens to dispose of their property in a certain way and rights. Creditors have an interest in obtaining real performance in a transparent bankruptcy proceeding initiated and financed by a bona fide debtor, rather than selling their bad debts at a loss or writing them off as bad debts.
In view of the arguments mentioned above, the proposed draft law aims to adopt a legal framework for the bankruptcy proceedings of natural persons, which will fill the gap in the Bulgarian legislation and regulate the proceedings in accordance with public expectations, the requirements of the acts of the European Union and the peculiarities of the national legal system.