Slovakia: new bankruptcy and restructuring law

From 1 January 2006, new bankruptcy and restructuring laws came into force in Slovakia, which distinguish between bankruptcy, restructuring and individuals discharging their debts.

Bankruptcy

As the most common form of property settlement used by debtors, the process has been largely formalized:

• There are standard forms for applying to register receivables in bankruptcy proceedings.
• Where an application is incomplete or incorrect, the application is rejected with no opportunity for creditors to correct it.
• There are time limits within which the administrator in bankruptcy and the court must act.
• The period for filing applications is reduced from 60 to 45 days after bankruptcy declaration.
• Bankruptcy is now dealt with by eight district courts (previously, three regional courts) which should make the process more efficient and user-friendly.
• The court fee has risen from SKK 10,000to SKK 50,000 for corporate bankruptcy and SKK 20,000 for individual bankruptcy (paid by the creditor making the application).
• It is no longer possible to file for bankruptcy or register a receivable unless it is supported in writing by a valid court decision or acknowledgement of indebtedness.
• Corporate bodies must now file for bankruptcy within 30 days of becoming insolvent and unable to pay their debts and, if they fail to do so, expose themselves to a claim for damages from their creditors.

Restructuring

Whereas bankruptcy aims to satisfy creditors and usually results in the the company being wound up and deleted from the Trade Register, restructuring aims to stabilise a debtor’s affairs so that it can satisfy creditors by continuing in business. The process has also been formalized: applications for restructuring are also filed on standard forms and must be made within 30 days of official restructuring approval.

Discharge of debts by individuals

This is a new entirely arrangement only open to individuals, allowing them to get rid of their debts in installments after bankruptcy proceedings have ended. The arrangement requires court approval, to ensure the debtor’s intentions are fair and not an attempt to deprive creditors. If the court approves the arrangement, the debtor has three years to transfer a portion of his funds to the administrator who then distributes the funds among creditors. If the debtor duly complies with his obligations, the court will discharge his debts at the end of the three years period, effectively cancelling the remainder of his debts.