Consumer bankruptcy is often the last resort when liabilities are so high that we are unable to pay them back. Rising interest rates do not help those who have borrowed the maximum amount that the bank was willing to give them. Now every MPC decision for the holders mortgage loan with variable interest, it’s like a judgment.
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It seems that consumer bankruptcy will help you solve your financial problems and start over with a clean slate. Often, however, we do not think about the long-term, not necessarily positive effects that are associated with it.
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See also: Consumer bankruptcy. When is it known that this is the moment?
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Consumer bankruptcy – what is it?
Consumer bankruptcy is a legal proceeding to free you consumer, that is, a person who does not run a business, from debt. This is not synonymous with the redemption of liabilities, but with the redemption of the consumer’s property in order to satisfy creditors’ claims as much as possible.
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After the liquidation of the debtor’s property, the receiver prepares a debt repayment plan, i.e. the money obtained from the sale of what we have, the debts are repaid. It does not mean that we are released from them, but that when bankruptcy is declared, they stop growing (you cannot charge penalty interest or bring the debtor to court), and our property is earmarked for repayment. The law guarantees to keep only those items that are necessary in everyday life.
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In the event of a lack of income and assets (e.g. when we are dependent on other family members), the court may cancel the liabilities without establishing a repayment plan. However, before that, the court supervisor will check whether the debtor really has anything to cash.
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You can file for bankruptcy not only when the cause of your financial trouble is job loss, accident or illness. You can also go to the court when overdue obligations are the result of intent or negligence. The reasons will be investigated only at the stage of determining the repayment plan.
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How to file for consumer bankruptcy?
In order to declare consumer bankruptcy, you must submit a petition to the court yourself or seek help from a law firmspecializing in such matters. The application must specify to whom, how much and from when we are behind with repayment.
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You should also attach a current list of property along with its estimated valuation and all documents that will confirm the causes of insolvency, e.g. death certificate of a loved one, medical documentation confirming incapacity for work, termination of an employment contract, divorce petition, requests for payment, orders bailiffs or credit agreements.
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A court fee of PLN 30 must be paid for submitting the application.
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Then the court examines the case (it lasts from several weeks to several months), and when it approves the application, bankruptcy proceedings begin. The receiver takes care of the sale of the property and sets up a repayment plan to meet your creditors’ claims.
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I declare bankruptcy – what’s next with debts?
The property that manages to cash is used to pay off debts, while the remaining liabilities are written off. However, it is worth remembering that some of them cannot be canceled, e.g. alimony, fines or debts due to pensions and damages.
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Consumer bankruptcy will allow you to free yourself from the burdensome obligations, but it carries a number of consequences that must be aware of before submitting the application.
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The declaration of bankruptcy involves the liquidation of the debtor’s property, and before that, of course, the court will check whether the possessed movables and real estate have not been transferred to another person. If the house or flat is auctioned, it will of course have to be vacated, and the sum of the sale will only provide the amount that will allow you to rent the flat for 12-24 months.
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The receiver will also take part of the debtor’s income. Half of his salary will be at his disposal, but not less than the minimum wage for work. In turn, the retirement and disability pension will be seized in 25 percent.
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It should also be remembered that information about the declaration of bankruptcy will be made public and announced, for example, in the Court and Economic Monitor or in the Central Register of Restructuring and Bankruptcy.
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Consumer bankruptcy destroys the chances of obtaining financing from a bank. No institution will grant a loan to a person who is in the process of paying off creditors. Banks are very cautious also towards those clients who have already completed the entire process.
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Therefore, before submitting the application to the court, it is worth consulting a lawyer who will assess our financial situation. Maybe it will be possible to deal with debts, e.g. by restructuring the loan or consolidating liabilities.
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