Is 7500 consumer bankruptcies per year a lot or not enough?

A large update of the current consumer bankruptcy law has just been passed in the Parliament. Once signed by the President it will come into force within 6 months.

The changes are aimed at making it easier for non-entrepreneurs to declare bankruptcy and get rid of almost all bad debts (child support, alimony and criminal fines cannot be processed this way, but everything else can).

The already high acceleration of consumer bankruptcies each year will increase even more.

Here are some figures: Consumer bankruptcies declared in 2009-2014: 61 total. The law proved inefficient (by design, as banks and loan companies had the final say on the drafting of the bill).

Then came some changes to the law and the number went up to 1000 in 2015 and to 4.400 in 2016. In 2017 there were 5.500 consumer bankruptcies declared and in 2018 the number went up to 6.500. In 2019 the estimated number of consumer bankruptcies will exceed 6.500.

Please kindly hear the full interview I gave about the changes in the Polish Radio.

https://www.polskieradio24.pl/42/3306/Artykul/2309884,Otrzymanie-drugiej-szansy-ma-byc-szybsze-i-latwiejsze-Beda-zmiany-w-upadlosci-konsumenckiej

Comment:

Every functioning market economy must have a safety valve for failed businesses. The same thing applies to non-entrepreneurs. In Poland many of the consumers declaring bankruptcy are also in fact former entrepreneurs so the two spheres mix. Otherwise we discourage entrepreneurship and force many citizens into the shadowlands of enforcement avoidance. Those who have learned not to possess anything for fear of the enforcement officer still have to earn a living but this time they do it without paying taxes and outside the system of social security or public amenities such as loans, leasing etc. They are lost to the state as taxpayers and as clients to everyone else. That is just plain stupid.

There must be therefore a way out for them and a method to rejoin the society. Polish consumer bankruptcy law allows the debtor to completely rid themselves of debt in 1-4 years. That is not bad in comparison with other EU member states. Even without the newest changes it was a fairly lenient solution. Now, with the recent amendments it will become even easier to declare consumer bankruptcy. We still have a long way to go, but the process is accelerating.

I am very much in favour of allowing consumers access to bankruptcy but we all must be aware that if we make the process too easy, it will be exploited rather than utilized. Polish people are very practical and not very law oriented so if they find a loophole in the system, they will use it. So let us hope that this opening of the gates will not create a flood.