Basic information about debt relief

1. What is Debt Relief (Oddlužení)?

Debt relief (oddlužení) constitutes a statutory method of resolving a debtor’s insolvency under Czech law, commonly referred to as personal bankruptcy ("personal insolvency proceedings").

It is based on the principle of consolidating all of the debtor’s liabilities into a single, regularly paid instalment, typically administered through an insolvency administrator.

During debt relief proceedings, the accrual of default interest and penalties is effectively limited, and enforcement proceedings (execution or judicial enforcement) affecting the debtor’s assets are suspended.

Debt relief is available to natural persons, including entrepreneurs, subject to statutory conditions.

Provided that the debtor duly complies with all statutory obligations, the insolvency court may grant a discharge from the payment of outstanding claims ("discharge of residual debts"), except for claims expressly excluded under applicable law (e.g. maintenance obligations, damages resulting from intentional criminal offences, and criminal penalties).

Debt relief is governed primarily by Sections 389–418 of Act No. 182/2006 Coll., on Insolvency and Methods of its Resolution (the "Czech Insolvency Act").

2. Statutory Preconditions for Approval of Debt Relief

Multiplicity of creditors: The debtor must have at least two creditors.

Insolvency (inability to pay debts): The debtor must have monetary obligations more than 30 days overdue and must be objectively unable to satisfy them. In practice, this is typically evidenced by a failure to meet obligations for more than three months or by unsuccessful enforcement proceedings.

Sufficient income: The debtor must demonstrate a stable and verifiable source of income sufficient to cover (i) the statutory non-seizable amount and (ii) the minimum required monthly instalment, including the remuneration and expenses of the insolvency administrator.

Good faith: The debtor must act in good faith and not pursue debt relief with a dishonest intent.

Negative conditions: Debt relief shall not be permitted if the debtor has been granted a discharge within the past 12 years or if a prior petition was rejected within the past 5 years due to dishonest intent.

3. Commencement of Proceedings and Filing Requirements

Debt relief proceedings are initiated by filing (i) an insolvency petition and (ii) a petition for the approval of debt relief, including all statutory annexes.

As a rule, the debtor is not authorised to file such petition independently (unless qualified by law). The petition must be prepared and submitted electronically by an authorised person.

Authorised persons include attorneys-at-law, notaries, bailiffs, insolvency practitioners, or accredited entities providing debt counselling services.

The statutory remuneration for preparation of the petition amounts to CZK 4,000 for an individual debtor and CZK 6,000 for a joint petition of spouses; such remuneration is treated as a claim within the insolvency proceedings and is not paid upfront.

4. Methods of Debt Relief

Debt relief may be carried out by the following methods:

(a) Liquidation of the debtor’s assets (monetisation of the insolvency estate), whereby all assets forming part of the insolvency estate are sold to satisfy creditors. The debtor’s residence is not protected under this method unless specific statutory protections apply.

(b) Repayment plan (instalment schedule) combined with partial liquidation of assets. This is the most commonly applied method.

In approving debt relief, the insolvency court typically orders wage deductions, determines the expected level of creditor satisfaction, and imposes obligations on the debtor to surrender assets and cooperate with the insolvency administrator.

5. Completion of Debt Relief and Discharge

As of October 2024, no fixed minimum percentage of debt repayment is required by law.

For discharge to be granted in the case of a repayment plan, the debtor must either (i) satisfy creditors in full or (ii) comply with all statutory obligations for a period of three years and achieve the level of satisfaction determined by the court.

Upon successful completion, the insolvency court issues a decision confirming completion and grants discharge from unpaid claims.

Discharge does not extend to claims excluded by law, including maintenance claims, damages arising from intentional criminal offences, and monetary penalties imposed in criminal proceedings.

In exceptional circumstances, the proceedings may be interrupted or extended for a limited period as provided by law.

6. Obligations of the Debtor During Debt Relief

The debtor is required to:

- perform gainful activity to the extent reasonably possible and disclose all income;

- surrender extraordinary income (including gifts and inheritance) for distribution to creditors;

- notify without undue delay any changes in residence, employment, or income;

- submit regular reports on income to the insolvency court or administrator;

- refrain from granting preferential treatment to any creditor;

- refrain from incurring new obligations that cannot be fulfilled when due;

- make best efforts to maximise satisfaction of creditors’ claims.

7. Practical Aspects – Non-seizable Amount and Distribution of Income

The debtor retains a statutory non-seizable portion of income ("protected amount"), the calculation of which is determined by applicable legal regulations.

Any income exceeding this protected amount is subject to deductions for the benefit of creditors, typically distributed in proportions defined by law (commonly two-thirds to creditors and one-third retained by the debtor, subject to thresholds).