There are many financial institutions on the market that will lend money to anyone, even to people who are already in debt. What happens when someone with several loans can no longer repay their debts? The companies that were so friendly when lending money start adding high penalties to the debt and eventually send a bailiff (exekutor). If this sounds like your situation, it may be time to consider personal bankruptcy, that is, insolvency proceedings.
Have you already tried every possible method to repay your debt quickly and easily? And nothing works? Your debts keep growing instead. Another penalty is always just around the corner, so you sometimes cover your repayments with another loan? It may be time to think seriously about debt relief (oddlužení).
Tip: Before you take out any loan, compare all the offers carefully using a loan comparison website.
Insolvency, what it is
Insolvency means that as a debtor you are bankrupt and can no longer pay your debts. After paying all your bills, you have almost no money left to live on. You want to repay your debts, but you simply cannot manage it. At this point, insolvency proceedings can rescue you. Some people believe that this process (debt relief) means your debts are written off and you just carry on. It is not that simple. Someone with an average income will repay their debt in full.
So why would you need insolvency if you still pay off your whole debt? The point is that during insolvency proceedings the state protects you from your creditors. Throughout debt relief, it is clearly set out when and how much you will pay them, and they cannot add further penalties and fines. Nor can they seize your property.
How insolvency proceedings work
Debt relief begins with filing a petition with the court, because insolvency is a type of court proceeding. Its aim is to find the best possible way to repay your debts. The court sets the share for each person you owe money to. Creditors are then paid at least part of what they are owed, possibly all of it, depending on your situation. Throughout the insolvency, an insolvency administrator will be in contact with you. You cannot prepare the insolvency petition yourself. Only accredited lawyers, notaries and insolvency administrators are authorised to do so.
Once the process has started and part of your debt still remains, you can ask the court to waive it.
Once the insolvency is approved, you pay the insolvency administrator, which costs you around 1,000 CZK (about 46 USD) a month. The administrator sets up monthly repayments with you or agrees with you on selling your property, if you own any. If you own the flat you live in, you do not need to worry. You will not be forced to sell it unless its value is unusually high compared with normal prices.
How much money you keep during debt relief
You are entitled to keep the subsistence minimum, which is currently 7,771.50 CZK (about 360 USD) (from 1 July 2020). For your husband or wife and children, you can deduct a further 2,590.50 CZK (about 120 USD) per person. The rest of your pay goes towards paying your debts.
What is bankruptcy?
This is when your debts get out of hand and you are unable to repay them. What does bankruptcy look like?
Over-indebtedness: you have several loans, and together they add up to more than the value of your property.
Inability to pay: do you have more than 2 creditors, and have your bills been lying at home unpaid for more than 30 days? In that case, you are unable to meet your obligations. Once this lasts longer than 3 months, you are insolvent.
Impending bankruptcy: people file for insolvency on these grounds when it is clear that they will not be able to repay a significant part of their debts.
Conditions for insolvency
Are you seriously thinking about declaring personal bankruptcy? It is not a simple step. You must meet the conditions below, and you must meet all of them at the same time:
- You have had no criminal record for economic or property offences in the last 5 years
- You owe money to at least 2 creditors
- Your repayments are 30 or more days overdue
- You can pay 30% of your debts within 5 years, or 60% of your debts within 3 years, or at least the minimum percentage of your debts within five years. Try the calculator to check your situation
How do I start with insolvency?
You want to declare personal bankruptcy, but you do not know what to do or whether you are entitled to state-supported debt relief? You have read the conditions but are still not quite sure what they mean?
Contact an organisation that will help you with insolvency. We recommend non-profit organisations. They exist to help people who have got into serious difficulties because of debt. If your insolvency is rejected, they will gladly help you get your debts in order.
Try the non-profit organisation Česko bez dluhů or People in Need (Člověk v tísni): how to survive debt.
If you still prefer a paid lawyer, the maximum they can charge is set by law. For drafting a petition for an individual, it is a maximum of 4,840 CZK (about 220 USD), and for debt relief for a married couple 7,260 CZK (about 330 USD). If a lawyer asks for more, do not pay and find someone else.
Insolvency for married couples
Are you married and both in debt? You can use joint insolvency for married couples, which can have its advantages, even if only one of you took on the debts. If you go through insolvency together, creditors cannot claim your partner’s property. And if you are both in debt, the insolvency administrator’s fees will cost you less.
Conclusion
Insolvency = debt relief = personal bankruptcy. These are synonyms with the same meaning. Insolvency is governed by the Insolvency Act. Do not expect your debts to simply disappear so you can carry on. It depends on your income and your ability to repay. In any case, you will be protected from your creditors and there will be no bailiffs standing at your door. The court decides how much you pay each creditor every month, so that you keep the subsistence minimum and your creditors do not take absolutely everything from you.
Whatever your situation, keep working on your financial literacy and on your family budget.
USD amounts are approximate, converted at the Czech National Bank rate of 21.80 CZK per USD on 2 October 2026.
