WHAT IS INSOLVENCY OF AN INDIVIDUAL IN ROMANIA?
Insolvency is the state of a person’s (debtor’s) assets that is characterized by insufficient funds to pay debts.
The insolvency of a natural person will be presumed if, within 90 days of the due date of the obligation, the debtor has not paid the existing debts and the creditor can easily assume, on the basis of justified grounds, that the debtor will not have sufficient assets to meet his obligation within the next 12 months.
Insolvency proceedings of an individual can be carried out in three ways, all regulated by Law 151/2015. Thus, on the one hand, there is an out-of-court variant, called insolvency proceedings based on a repayment plan, whereby the debtor expresses his willingness to his creditors to execute the obligation consisting in the repayment of the debt, in full or in installments. The other two procedures involve the involvement of the court, i.e. the judicial liquidation of assets or the simplified procedure.
Insolvency proceedings on the basis of a repayment plan involve the creditor and the debtor agreeing on a strategy for settling the claim, which will include a number of elements such as the method of payment of the debt, the amount of an instalment, the payment deadlines and the measures that the creditor may take if the debtor fails to meet his payment obligations.
The judicial liquidation of assets procedure is a judicial procedure and involves the sale of assets held by the debtor in order to cover his existing debts.
The simplified insolvency procedure, like the liquidation of assets procedure, is judicial in nature, but does not involve the sale of the debtor’s assets to cover debts. The simplified insolvency procedure5 involves imposing obligations on the debtor for a period of three years in order to restore the debtor’s financial situation and to discharge the debts he has incurred.
This procedure can be used by:
- those who have no assets or no traceable income;
- those whose debts do not exceed 10 times the minimum wage;
- who are over the standard retirement age or who are physically unable to work.
HOW TO OPEN INSOLVENCY PROCEEDINGS?
The opening of insolvency proceedings requires the following preliminary steps to be completed
- Notification of each known creditor of the intention to open insolvency proceedings, by any means of communication that ensures confirmation of receipt at least 30 days prior to the date of filing the application for opening insolvency proceedings;
- obtaining and attaching to the application for the opening of the insolvency proceedings proof that he is employed or engaged in an income-producing activity;
- obtaining and attaching to the application documents proving income from employment and income assimilated thereto, sums of money due by way of social security pension or other social benefits, and any other income;
- obtaining and enclosing with the application copies of tax returns for the last 3 years prior to the date of application, an extract from the criminal record and up to date tax record and a full report from the Credit Bureau, issued no later than 30 days before the date of application;
- if he has a matrimonial property regime other than that of legal community of property, the debtor shall obtain, and attach, an extract from the National Notarial Register of Marital Regimes;
- the debtor shall draw up and attach to the application a proposed debt repayment plan containing at least the amounts which the debtor considers that he will be able to pay periodically to his creditors.
Any natural person who has been domiciled or residing in Romania for at least 6 months prior to the filing of the application and who is acting in good faith and does not seek to defraud creditors may apply for insolvency proceedings.
There are also 7 categories of debtors who cannot opt for this procedure
- who has been convicted of a tax evasion offense;
- who has been dismissed within the last two years for reasons attributable to him/her;
- a person whose insolvency proceedings on the basis of repayment, liquidation of assets or simplified proceedings have been closed, for reasons attributable to him/her, within the last 5 years prior to the opening of the new insolvency proceedings;
- a person who, although able to work, has not found a job and has no other source of income, or who, for unjustified reasons, has refused the offers of employment received;
- who has incurred new debts by incurring unnecessary expenditure for pleasure, even though he knew that he was insolvent;
- who has intentionally or through gross negligence brought about the insolvency;
- who is already the subject of insolvency proceedings on the date on which he wishes to open new proceedings.
If you need legal assistance with insolvency proceedings, a law firm in Cluj can provide professional guidance tailored to your situation.
