Romania’s government endorses draft bill regulating insolvency of individuals

Newsroom 02/10/2014 | 14:30

The government supports a draft bill that aims to hinder the foreclosure of individuals that can’t repay their debts and promote repayment plans, although the government told the International Monetary Fund it would block such initiatives, reports Mediafax newswire.

The bill states that Romanians that have debts and bank loans that need to be repaid will have to benefit from clear regulation, which protects borrowers in good faith that can’t keep up with the payments schedule. It will apply only for individuals that do not have entrepreneurial activities, that are insolvent, and includes two options for covering the debts – the repayment of debts based on a plan or the liquidation of assets belonging to the debtor.

“The foreclosure has to be applied only in the last instance, when the individual debtor can’t maintain the commitments from the moment the contract was signed, due to various reasons attributable to himself or herself,” according to the bill.

Debtors will be able to ask a judge to approve their filing for insolvency if they are unable to pay maturing debts to two or more creditors, in 30 days since they reach maturity. They will have to add a repayment plan to the insolvency request.

The court will not be able to refuse the insolvency request based on the fact that the debtor does not have enough assets to cover the cost of the procedures, because the state will cover them.

Mediafax pointed out that in the last two years, in the letters of intent signed with the IMF and the European Commission, the executive arm of the EU, the government said it would block any legislation regulating personal bankruptcy and debt recovery because it would “undermine” the repayment discipline of individuals.

According to a study of consultancy firm London Economics, which was commissioned by the EC last year, Romania is one of the few EU members that haven’t regulated the insolvency of individuals and which doesn’t offer any protection against creditors.

The National Bank of Romania has opposed such initiatives, stating that it would hit the stability of the banking system and would push lending costs up. The US Commercial Service said that the insufficient number of bankruptcy judges and lawyers will generate delays in the judicial process.

The government approved earlier this year a loan rescheduling scheme for individuals, which would lower the bank installment paid by borrowers for two years, but has failed to gain traction against debtors. Prime Minister Victor Ponta said that banks were to blame for the low enrollment rate.

Bankers said that clients already had the option to negotiate a restructuring program with lenders.

Romania has an ongoing EUR 4 billion stand-by agreement with the IMF and the EC.

Ovidiu Posirca

 

BR Magazine | Latest Issue

Download PDF: Business Review Magazine March (II) 2024 Issue

The March (II) 2024 issue of Business Review Magazine is now available in digital format, featuring the main cover story titled “BAT DBS Romania Hub: A Vibrant New Office For An Employee-Centric
Newsroom | 27/03/2024 | 17:32
Advertisement Advertisement
Close ×

We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

Accept & continue