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Welcome / Blog Archive / Book Review / 2020-01-doc3 Consumer insolvency in Europe

2020-01-doc3 Consumer insolvency in Europe

For over three decades individual EU Member States have adopted specific insolvency regimes regarding natural persons, sometimes also termed ‘consumers’, ‘non-merchants’, ‘non-traders’ or ‘natural persons who are not entrepreneurs’, see Article 2(h) Restructuring Directive 2019/1023. In 1998, the Netherlands adopted as one of the last in the European Community (at that time) their debt rescheduling regime. In the second decade of our century countries like Greece, Italy, Hungary, Lithuania, Luxembourg and Croatia have followed, whilst in Bulgaria – as far as I know – legislation is pending. Generally, the reason for a national treatment of the phenomenon seems to be that in the area of natural persons many times some other purposes in legislation may have a primary attention, such as the protection of a certain minimum of assets and income, available for an individual natural person (and his household) or the specific goal of financial rehabilitation of over-indebted individuals and families and their reintegration into society. Such a rehabilitation may then include specific support on debt counselling, participating in social welfare programs or certain obligations to be fulfilled during participation in an collective insolvency proceeding or debt rescheduling scheme, such as the duty to inform a court or an insolvency supervisor on new received income, the duty to apply for a job, and so on.

In Europe, aside of mere symbolic policy statements of the Council of Europe, a form of convergence or harmonisation of key policies and views relating to financial distress of natural persons is near to absent. I seriously query whether, also after the ‘end’ of the financial crisis, with hundreds of thousands of families overburdened with debt, this position is sustainable. In the light of desirabilities, expressed in the Treaty on European Union (‘to deepen the solidarity between their peoples, while respecting their history, their culture and their traditions’ and ‘to promote economic and social progress for their peoples’, as well as e.g. Article 3(1) TEU (‘The Union’s aim is to promote peace, its values and the well-being of its peoples’) time is ripe to develop a minimum basic standard to deal with these problems. Certainly, the – seen from a European perspective – complex and detailed rules in the member States it is not very inviting to dive into. Also, an obstacle in developing a European mind on the theme will be (apart from undefined ‘anti-Brussels’ baby-burps) the largely different views on the fair and equitable allocation of consumer credit risks and the Member States’ unaligned views on providing rehabilitation or a fresh start to a natural person/debtor who has (unfortunately) fallen into a situation that he reasonably cannot repay all his pre-insolvency debts. As said, Member States’ have largely different rules regarding the question what belongs to the insolvency estate or – on the contrary – what is exempted from such an insolvency estate, the contributions to be made to the estate, the extend and the nature of the discharge (‘fresh start’), restrictions imposed on the debtor during the proceedings or as a condition for such a discharge, the events in which such proceedings may be terminated, the avoiding powers of creditors, the duration of the proceedings, just to name a few.

There are a few European solutions, but only for the phenomenon of ‘bankruptcy tourism’, where a natural person is shifting its COMI to another Member State, to be in the position to have the court of that Member State open collective insolvency proceedings, to which the respective debtor will be a subject. It is rather likely that such a choice is sparked by the lighter nature or the specific legal effects of these proceedings as similar proceedings would have had if the debtor would have had its COMI in the Member State from which he travelled, including the durations of the proceedings. The central idea of a European Union and building a single market is that in all countries the rules for financial distress for people are rather alike with regard to access to insolvency legislation. Rules which conflict with each other and create incentives provide incentives for people to engage in ‘bankruptcy tourism’ is a sheer contradiction to this central idea.

Although my sense is that this tourism has declined, there is no reason for Europe to sit on its hands. To start to solve this European lack of commitment, politicians and lawyers should have a basic understanding of each country’s insolvency system, including other country’s proceedings, as well as knowledge of the foreign country’s court and legal system, legislation and judicial practice. The book ‘A Guide to Consumer Insolvency Proceedings in Europe’, published in 2019 and briefly discussed here, provides the necessary information in the largest, most up-to-date and comprehensive book on this topic. Assisting the readers in their navigation through the differences, similarities, and peculiarities of insolvency proceedings in all Member States of the EU, Switzerland and Russia, this book is a unique guide to insolvency proceedings across Europe. Some fifty authors illustrate the numerous practices across Europe and they allow the reader to evaluate each aspect both on its own merits, as well as in comparison to the approaches applied in other European jurisdictions. The countries covered are: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, England and Wales, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, and Switzerland. The book also contains two valuable comparative analysis, of which Veronika Sajadova’s ‘Consumer insolvency proceedings: comparative legal aspects’, an 80plus pages overview, is an excellent read, ending with recommendations, including a list of nine topical trends in personal insolvency regimes.

The country reports in the book disclose the variety of rules laid down in legislation, presented in a similar format: historical background, a pre‐action stage, access to proceedings, the payment plan, discharge, competent court, insolvency office holder, position of the debtor, debtor’s assets, debtor’s contracts and transactions, position of the creditor, costs of the proceedings, supervision, criminal offences in connection with bankruptcy, debt counselling services, international insolvency law, statistics, criticism, and recommendations. The chosen way of presenting is a helpful aid for comparison and analysis. A word of criticism could be that not all chapters seem balanced, for instance with Estonia 55 pages and Ireland just 12, and that the balance on substance in the chapter I can oversee (The Netherlands) is much more on social-economic policy reports then using available legal literature.

Agreed, insolvency law and related practices are quite different in the EU, as well as there will be divergent views that national states have developed in various social and economic approaches. This book briefly discussed here will be a very helpful tool for insolvency practitioners and judges. The book may certainly assist policy makers, academics and legislators in at least understanding the different rules and practice and the way countries try to improve the quality of their legal systems. A first step to align basic rules to be used in all countries, so all EU citizens may rely on a form of similar treatment in financial difficult circumstances, can be taken.

A Guide to Consumer Insolvency Proceedings in Europe, edited by Thomas Kadner Graziano, Juris Bojārs and Veronika Sajadova, Edward Elgar Publishing, Cheltenham, UK / Northampton MA, USA ISBN 978-1-78897-564-3

Product information:

Note: this book I received free of charge from the publisher with the request to announce it or to review it on my blog at