The Czech Senate has approved an amendment to the Insolvency Act expending to a preferential debt relief regime that now only applies to the elderly and disabled to people paying off debts incurred when they were minors. The amendment has yet to be signed into law by the president.
Members of the lower house of Parliament had voted unanimously in July to amend the Insolvency Act to include the new category of debtor in the preferential regime. If signed into law by the President, it could take effect already in September.
An earlier amendment to the Civil Code would transfer debts of children under 15 to their parents or guardians. Over 6,000 children in the Czech Republic are currently threatened with distraint orders while tens of thousands of young adults have debts carried over from childhood.
Distraint, the seizure of property for non-payment of mostly trivial debts, has become a major issue affecting an increasing number of Czech households, with the threat of usurers and predatory collection agencies posing a rising threat.
Under a punitive debt-collecting system that has no parallel in western Europe, local transport authorities and public utilities sell small unpaid debts to private agencies at a hefty mark-up. Once late-payment sanctions and legal and court fees are added, modest fines mushroom into unsustainable sums.
Social Watch CZ, a Czech non-profit group focused on eradicating poverty, says in particular the transfer of enforcement of court decisions to private bailiffs and the emergence of unregulated non-banking companies has resulted in nearly 10 percent of the Czech population somehow affected by enforcement proceedings.
If family members are included, around 2.5 million people – a quarter of the population are affected by these proceedings.