The possibility of debt forgiveness in the context of personal insolvency – the exoneration of remaining liabilities
The exoneration of remaining liabilities is a legal institute, within the personal insolvency procedure, for individual debtors to resort, and which allows the forgiveness of debts that are not fully paid within the insolvency procedure by the liquidation of the debtor’s assets.
It gives the debtor a second chance (a “fresh start”) by releasing the debtor from the liabilities that he would otherwise never be able to pay in the course of his life.
The discharge of the remaining liabilities includes a period of assignment of income, during which the insolvent debtor must assign his disposable income to the Administrator appointed by the Court, who is responsible for supervising and reporting on the proper fulfillment of the assignments to the Court and the creditors.
It must be noted that, for several years, the law determined an income assignment period of 5 years; more recently, in 2022, this period was reduced to 3 years, to great benefit of debtors.
Insolvency proceedings with discharge of remaining liabilities that were already underway also benefited from this change.
How does this mechanism work?
The Court determines the debtor’s “unavailable income” on the basis of their income and essential household expenses.
Once the amount that is ascertained to be essential for the debtor’s minimum sustenance has been determined, the remaining amount is called the debtor’s “disposable income”.
Every month, the debtor must hand over to the Administratot the income that is determined to be available, i.e. the income that, once his essential expenses are taken care of, will be delivered to his creditors.
When monthly income is low, it may occur that the debtor does not have to hand over any money.
Once the three years of delivery of income have passed, and once certain requirements have been met, the Court will order the forgiveness of debts that have not already been fully paid.
It should be noted that not all debts are forgiven, as is the case with debts to the tax authorities and social security.
These debts must be settled after the insolvency is closed, which can be done, if necessary, through payment plans with these entities; otherwise, the debtor’s income may be seized.
