Although in Lithuania natural persons have been granted bankruptcy only since 2013. By March 1, almost 900 people had already taken advantage of this opportunity. The bankruptcy of a natural person is a legal procedure whereby the debtor declares his inability to pay his debts. One of the key conditions for declaring bankruptcy is the inability to meet financial obligations: the individual becomes insolvent.
In the event of a bankruptcy, the liquidation of the debtor’s assets and the distribution of the proceeds to the creditors are carried out, and the whole process takes 3 years. It should be noted that the Natural Bankruptcy Act states that only a natural person who seeks to replace his insolvency with solvency may declare bankruptcy.
When is a Personal Bankruptcy Announced?
The bankruptcy of natural persons is initiated when the person is unable to fulfill his obligations to his creditors, the payment terms have already expired and the amount to be repaid exceeds 25 minimum monthly salaries, ie USD 9,500. In short, if you are insolvent, you must provide the relevant documents, which include your requisites, list of creditors, information about the mortgaged property, income received, and so on. All the required information is provided by the Law on Bankruptcy of Natural Persons of the Republic of Lithuania; Not only does one have to be insolvent in order to initiate bankruptcy, they must be honest.
The case is not instituted even if the person has become insolvent due to harmful habits. Legally harmful habits include alcohol, narcotic and psychotropic substance use, gambling. In addition, the natural person’s bankruptcy law rejects a bankruptcy petition if the insolvency is due to a criminal or criminal act. Bankruptcy is also not pending if you are the owner of a bankrupt company. It is worth noting that bankruptcy proceedings can only be reopened after 10 years;
Personal Duties in Bankruptcy
For a natural person to succeed, certain obligations must be met. One of the key points is the responsibility to manage and use your assets from the moment you apply for the bankruptcy of a natural person until the effective date of the court order to open such proceedings.
In addition, any financial change obligations referred to in Section 4, Article 16 shall be complied with, for example, upon receipt of income in excess of one-half of the basic monthly social security benefit, within a maximum of 5 business days into a personal account with the credit institution.
In addition, the bankruptcy administrator must be notified within 10 working days of any change in the financial situation which has improved. The duties of a natural person in bankruptcy include administrative matters, such as the need to execute a plan, cooperation with the bankruptcy administrator, and others.
Personal rights in bankruptcy
Not only duties, but also rights are involved in the opening of insolvency proceedings. All provisions and rights of the individual are set out in Section 4, Article 17. The bankruptcy of a natural person and the process of its execution are the constant communication with the appointed bankruptcy administrator, so the person has the right to prepare and submit an adjustment of the bankruptcy process plan, which would allow the person’s solvency to be restored faster. In addition, the individual has the right to information about the sale of assets or the use of funds, and can attend and discuss creditors’ meetings, such as how to obtain escrow statements.
The process of declaring one’s own bankruptcy and insolvency is a relatively new process in Lithuania compared to other EU countries, but the good practices that have been adopted encourage people to give themselves a second chance to return to a normal life that is not paralyzed by financial insolvency.