The new legislation on consumer bankruptcy takes effect on 1 January 2016, and the law is perceived as an attempt to give over-indebted citizens a chance for a fresh start and offer them an opportunity to repay debts in a controlled manner.

The legislation regulates rules for the bankruptcy of consumers, out-of-court settlements involving counsellors, proceedings before courts and prerequisites for freeing debtors of remaining liabilities.

Presenting the legislation to lawmakers in September, Justice Minister Orsat Miljenic said that this law was "not a magic wand" but a difficult procedure both for debtors and creditors, however, it offered a chance for a fresh start to debt-ridden individuals.

All insolvent persons could file for bankruptcy if for three straight months they have not been able to pay their debts which exceed HRK 30,000.

Miljenic said this was a new institute in Croatia, although all but four European Union countries have it. 

A creditor can in no way force a debtor to file for personal bankruptcy without the debtor's consent.

Before filing for bankruptcy, a debtor would first have to attempt to settle with the creditors out of court, before a Financial Agency advisory body, but if no agreement is reached, the proceedings would continue in court, with the consumer getting another chance to settle with the creditors.

If no court settlement is reached, the court would appoint a trustee to divide the consumer's estate and represent a bridge between the court, the consumer and the creditors.

Debts would be written off for debtors without assets or job prospects, while employed debtors would retain money only for the bare necessities, the rest going towards paying off their debts. The amount for the bare necessities would be decided by a court.

When it comes to real estate, a debtor could stay in a property if they have no other place to live for the duration of the bankruptcy proceedings. After that, it would be seen how much of the debt has been paid off and decided if the property would be sold.

Consumers who file for bankruptcy would have to report to the trustee about any changes to their assets for a period ranging from one to five years, to be decided by a court, depending on their assets and debts. Unemployed consumers would also have to try to get a job.

According to the Finance Agency, 323,887 Croatians had blocked accounts at the end of this October, 1.2% up year on year, and their debts soared to HRK 35.8 billion, 21% more than in 2014.

The biggest portion of this debt, 19.5 billion kuna, were liabilities towards banks. Those citizens owed HRK 3.4 billion to the state budget, and 1.08 billion kuna were debts to insurers, leasing companies and factoring companies. 

Also, HRK 986.2 million were liabilities towards telecom operators.


(EUR 1 = HRK 7.6)

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