Questions & Answers

Who is applying for a natural person's insolvency process?
 
The natural person's insolvency proceedings can be initiated by a natural person who has been a taxpayer in the Republic of Latvia for the past six months and who has financial difficulties.
 
The Insolvency Law provides that a natural person's insolvency proceedings can be initiated if one of the following is present:
 
·       the person has no opportunity to settle the maturity of the debt and the total debt is over 5,000 euros;
·       due to evidentiary circumstances, it will not be possible for this person to settle debts whose maturity will occur during the year and total debt obligations in excess of 10,000 euros.
 

What expenses should be taken to start the process?
 
A precondition for the application of insolvency proceedings is a single payment of a single person's insolvency deposit deposit in the amount of two minimum monthly wages (860 euros) in a specially created account of the Insolvency Administration. The Insolvency Administration of the Deposit shall direct the insolvency administrator to a single remuneration.
 
State fee for filing an application for a natural person's insolvency proceedings in court - 71.14 euros.
 

Restrictions for opening insolvency proceedings?
 
The insolvency law states that the individual's insolvency proceedings are not applicable to a person:
 
1.     which during the past three years prior to the declaration of the insolvency of a natural person has provided deliberately false information to its creditors;
2.     which has used the granted credit for non-contractual purposes, and the decision on the criminal case has come into force;
3.     which during the past 10 years before the declaration of the insolvency proceedings of this natural person has been declared a natural person's insolvency proceeding, within the framework of which obligations have been settled;
4.     during the last five years prior to the declaration of the insolvency proceedings of a natural person or during the insolvency proceedings of a natural person, a court judgment has come into force in a criminal case, which establishes that the debtor has avoided payment of taxes.
 

Who should be listed in the insolvency application?
 
The application for a natural person's insolvency proceedings must specify:
 
1.     the debtor's name, surname, personal identity number and declared place of residence;
2.     the circumstances in which the individual is unable to fulfill his obligations;
3.     all outstanding commitments and their amounts;
4.     all obligations, the due date of which will occur during the year;
5.     the total amount of all liabilities, the due date of which will occur during the year;
6.     composition of the property of the debtor, including the part of the debtor in the joint property of the spouses and other joint property;
 
 
What happens after submitting an insolvency application to a court?
 
If an insolvency proceeding is filed by the debtor together with his spouse or with a person who is compulsorily affiliated with the debtor or to the second degree, then the information referred to in the first paragraph of this article shall be indicated for each applicant individually.
 

What does the declaration of insolvency proceedings of a natural person mean?
The natural person's insolvency proceeding shall be examined by the court within seven days from the day of its initiation. When declaring a natural person's insolvency proceedings, the court will also appoint an insolvency administrator.
 
When the court declares the insolvency proceedings, it automatically suspends the proceedings against the debtor. This means that the enforcement proceedings in cases involving the recovery of the sum ordered but not recovered and the enforcement of the debtor's obligations by the court are suspended.
 
The debt is also being suspended. The borrower will cease to increase interest on loan (loan) use, increase of statutory interest, increase in the amount of the penalty (including a percentage increase in the penalty), and increase of delayed money.
 
As a result of the insolvency proceedings of a natural person, the debtor loses the right to dispose of all his belongings, as well as property owned by or held by third parties (except for property that can not be recovered), and this right is acquired by the administrator. Similarly, the debtor is no longer entitled, without the consent of the administrator, to conclude more than once a month transactions exceeding one minimum monthly wage more often than once a month.
 
The debtor after the declaration of the insolvency proceedings of a natural person is prohibited from carrying out activities that cause damage to creditors.
 
What happens after the declaration of insolvency proceedings?
 
Following the declaration of the insolvency proceedings of a natural person, the court will appoint the responsible insolvency administrator and apply successive bankruptcy and redemption procedures to the debtor.
 
Within the bankruptcy procedure, the entire property of the debtor is realized, and the proceeds from the sale thereof are diverted to satisfy the creditors' claims.
 
In the context of the redemption procedure, the debtor's income is directed towards satisfaction of creditors' claims and after the expiry of the maturity of the obligation, the liabilities not covered by this procedure are cleared.
 

What are the obligations of the debtor during the bankruptcy procedure?
 
The debtor is obligated:
 
1) no later than within 10 days after the date of the declaration of the insolvency proceedings of the natural person, to transfer his funds to the administrator;
2) to keep and manage your property as a good and diligent landlord;
3) prepare a plan for the liquidation of liabilities;
4) provide the administrator with the information necessary for the insolvency process;
5) cover expenses of the insolvency process of a natural person;
6) upon the administrator's request, transfer to the administrator of his property, with the exception of property that can not be recovered, and the property referred to in Section 140, Paragraph 2 of the Insolvency Law (which is essential for the receipt of income), and property belonging to third parties held or held by the debtor .
 
Who sells and when sells debtor's property?
 
The sale of the debtor's property is provided by the administrator, taking into account the property sale plan. An administrator initiates the sale of the property not earlier than two months after the declaration of the natural person's insolvency proceedings
 

Is it possible for a natural person to remain in the debtor's property in the insolvency proceedings?
 
The secured creditor and the debtor may enter into an agreement that the dwelling owned by the debtor, pledged in favor of the secured creditor, is not sold within the insolvency proceedings of a natural person. In this case, a natural person shall pay a secured creditor during the insolvency proceedings a payment not exceeding the amount that would be payable to the debtor by renting the property of the debtor servicing the security during the insolvency proceedings of the natural person. If the debtor after the completion of the bankruptcy proceeding is subject to a redemption procedure, the agreement remains valid and the secured creditor receives payments not exceeding the amount that would have been due to the debtor in the course of the insolvency proceedings of the natural person in charge of the secured debtor's property.
 
The secured creditor is entitled to depart from the concluded agreement and request the sale of the property of the debtor servicing the collateral, if the payments provided for in the terms of the agreement are not paid.
 

What happens after the bankruptcy procedure?
 
After the bankruptcy procedure is completed, the commitment procedure follows.
 
Are there any limitations on the redemption obligation?
 
The cancellation procedure is not applicable or terminated in the following cases:
 
1) during the last three years prior to the declaration of the insolvency proceedings of a natural person or during the insolvency proceedings, the debtor has entered into transactions that have led to insolvency or damage to creditors, and he was aware or should have been aware that the conclusion of such transactions could lead to insolvency or the creation of losses for creditors ;
 
2) the debtor has deliberately made false information about his property status and conceals his real income;
 
3) the debtor fails to perform the obligations provided for in the bankruptcy or redemption procedure, substantially impeding the effective conduct of the insolvency proceedings.
 

What is a natural person's retirement plan?
 
A natural person's retirement plan is a document submitted for approval by the court and where the debtor indicates:
 
1) creditors who have submitted their claims against the debtor within the term specified in the Insolvency Law, whose claims have not been satisfied in the course of bankruptcy proceedings, and the amount of claims of such creditors;
 
2) the term of the redemption plan;
 
3) the amount of the expected monthly income of the debtor;
 
4) the amount of the expected monthly income of the debtor to cover the debtor's maintenance costs;
 
5) the amount of the debtor's income necessary for the rent of his home or the use of interest payments to the secured creditor, if the debtor has agreed with him on the maintenance of the only housing;
 
6) the amount of the expected monthly income of the debtor, which will be directed to the implementation of the redemption plan;
 
7) the amount of the amount payable to creditors and the timetable for the payment in the cancellation procedure.
 

How long can a natural person deduct his obligations?
 
The deadline for implementation of a natural person's liquidation plan is determined by the debtor taking into account the expected income in the cancellation procedure.
 
If the debtor's income will be sufficient to cover at least 50 percent of the total liabilities remaining after the bankruptcy procedure is completed, the maturity of the redemption plan is six months from the date of the redemption procedure.
 
If the debtor is unable to cover at least 50 per cent of the total liabilities remaining after the bankruptcy procedure is completed, the maturity of the redemption plan is determined as follows:
 
1) one year from the date of the announcement of the redemption procedure if the debtor's income will be sufficient to cover at least 35 per cent of the total liabilities remaining after the bankruptcy procedure has been completed;
 
2) one year and six months from the date of the declaration of redemption if the debtor's income will be sufficient to cover at least 20 per cent of the total liabilities remaining after the bankruptcy procedure has been completed.
 
If a debtor during the redemption procedure is not able to cover at least 20 percent of the total liabilities remaining after the bankruptcy procedure is completed, the natural person's recovery plan foresees that one third of the debtor's income will be allocated to cover creditors' claims, but not less than one third of one minimum monthly salary per month. The maturity profile of a liability in this case is determined as follows:
 
1) one year from the date of the declaration of redemption if the debtor's total liabilities after the completion of the bankruptcy procedure do not exceed EUR 30,000;
 
2) two years from the date of the announcement of the redemption procedure if the debtor's total liabilities after the completion of the bankruptcy procedure are from EUR 30,001 to EUR 150,000;
 
3) three years from the date of the announcement of the redemption procedure if the debtor's total liabilities exceed EUR 150 000 after the completion of the bankruptcy procedure.
 

Is the Individual Debit Scheme verified by the court?
 
The debtor submits a physical person's liquidation plan for approval by the court. After the court has approved this plan, the debtor will send it to all the creditors included in this plan, as well as the authority responsible for arranging the insolvency register (the Register of Enterprises).
 
What are the consequences of announcing the redemption process?
 
Together with the court decision regarding the announcement of the redemption procedure:
 
1) the debtor is restored the right to dispose of all his belongings, as well as property owned by or held by third parties;
 
2) the debtor retains the prohibition, without the consent of the administrator, to conclude transactions for his property, the amount of which exceeds two minimum monthly wages.
 
What are the obligations of the debtor and what rights do they have during the redemption procedure?
 
The debtor has the following duties:
 
1) fulfill the plan for the liquidation of a natural person;
 
2) to earn income according to their possibilities in order to more fully satisfy the claims of creditors;
 
3) at the request of the administrator, provide information on the execution of a plan for the liquidation of a natural person;
 
4) cover the costs of insolvency proceedings of a natural person.
 
The debtor has the following rights:
 
1) retain at least two thirds of their income in order to cover their maintenance costs;
 
2) to retain the property essential to him for earning income;
 
3) ask the administrator for legal aid in connection with the insolvency process of a natural person (if necessary, also elaborate amendments to the plan for the liquidation of a natural person).
 

Can the cancellation procedure be terminated without releasing the debtor from indebtedness?
 
Yes, the debtor is not exempted from the remaining obligations specified in the retirement plan of the natural person if he has not performed the activities specified in this plan. If the liquidation proceedings are terminated without releasing the debtor from their obligations, creditors' claims are renewed and fully calculated, but the suspended proceedings and enforcement proceedings are restored.