A preferential debt relief regime that now only applies to the elderly and
disabled will likely be extended to Czechs paying off debts incurred when
they were minors.
MPs voted unanimously on Wednesday to amend the Insolvency Act to allow the new category of debtor to be included in the preferential regime.
The amendment’s authors said that leading figures in the Senate had signalled its smooth passage in the upper house. If signed into law by the President, it could take effect in September.
An earlier amendment to the Civil Code would transfer debts of children under 15 to their parents or guardians.
Over 6,000 children in the Czech Republic are currently threatened with distraint orders while tens of thousands of young adults have debts carried over from childhood.
The Czech Republic’s total debt amounted to CZK 2.34 trillion at the end
of the first quarter of 2019, up by CZK 161.5 billion in annual terms,
according to the Czech Credit Bureau (CRIF) database.
The volume of non-performing debt fell by CZK 4.1 billion to CZK 32.4 billion. The number of people who had problems making consumer debt payments fell 17 percent year on year. The number of people who failed to pay their housing loans fell by 16 percent.
The average amount of short-term debt “at risk” stood at almost CZK 98,000 at the end of the first quarter of 2019. This concerns debts in which three consecutive monthly instalments were not paid or were declared due by the creditor.
Over six thousand children in the Czech Republic are currently threatened with a distraint order over unpaid debts, while tens of thousands of young people have debts that they have carried over from their childhood. A new amendment to the Civil Code, set to be debated in the lower house on Monday, aims to prevent minors from falling into debt in the future.
Building owners and housing co-operatives are demanding government help in enforcing and expanding their rights to collect payments from errant tenants or allow for their eviction, or force the sale of flats to cover debts. Many housing co-operatives across the country face bankruptcy, the groups say, due to tenants’ and co-owners’ failure to pay utility and other bills.
A co-author of the Czech Insolvency Act of 2006 has warned that a proposed amendment to the law would “unintentionally” give debt relief to hundreds of thousands of people. Tomáš Richter, a renowned expert on both Czech and European insolvency law, said in an interview that lax rules set out in the current amendment could potentially mean adding another 600,000-700,000 to the list of people qualifying for debt relief.
The Central Bohemia region is at the centre of a row over a massive loan
taken out at a high interest rate.
A 6.0 percent interest rate was attached to the 1.8 billion crown loan taken out in 2008. Under the terms of the loan, the interest rate cannot be changed over its 20 year term.
The loan was taken out to pay for three new hospitals and was signed at the time by the then regional governor Petr Bendl of the Civic Democrats. The current regional governor, Jaroslava Jermanová, of ANO, was deputy of the financial committee that cleared the loan.
The loan, judged by experts to be far above the normal commercial rate, has been justified as hedging against interest rate increases. Bendl said the move was advantageous.