The bankruptcy of entrepreneurs aims to ensure the release of entrepreneurs from over-indebtedness within an efficient period. Comparative practice has shown that the most effective approach is one that allows debt relief and a “new beginning” for the entrepreneur through the reorganization process, but at the same time care must be taken to prevent abuse. This specifically means that the protection of creditors must be ensured and the collection of their claims prevented from being circumvented.
Besides the reorganization of entrepreneurs, the possibility of non-institutional reorganization is also being considered – the so-called, financial restructuring.
It is also announced that some property of entrepreneurs will be excluded from the bankruptcy estate. The bankruptcy estate normally consists of the entire assets of the bankruptcy debtor on the day of the opening of the bankruptcy, but also those assets that the bankruptcy debtor acquires during the bankruptcy.
In terms of exemption of certain entrepreneur’s assets from the bankruptcy estate, various criteria are mentioned: exemption based on value, exemption based on the amount of money, type of assets, use of assets, and need for certain assets by the debtor and their household members.
It is necessary to use the existing institutional framework, which would certainly be applied more easily when it comes to the bankruptcy of entrepreneurs, and it shall represent a greater challenge when the bankruptcy of natural bodies will start being regulated.
The most commonly listed issue in implementing this procedure in practice is that it is often quite difficult to differentiate between the entrepreneur’s business debts, and other debts of that same individual, which are unrelated to their business activity, since the bankruptcy of entrepreneurs should not be limited only to business debts.
Since introducing bankruptcy of entrepreneurs is the first stage towards introducing bankruptcy of natural persons, the lack of this procedural regulation of bankruptcy of natural bodies is that it requires an implementation of a new institution, especially because of personal data protection. Therefore, some consider that this kind of amendment of the bankruptcy procedure is a forced solution. The implementation of the bankruptcy procedure over natural persons (individuals) will also require special training of the administrative receivers, which requires material resources as well as time.
Although it was announced that the draft law would be prepared by June 2020, it is evident that the crisis caused by COVID-19 has contributed to this procedure being prolonged.