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Personal bankruptcy - The most important facts and provisions

Both consumers and sole proprietors are covered by the personal bankruptcy regulated in Secs. 181–216 Austrian Insolvency Code (InsO). The reason for this exceptional equal treatment of the two groups is that, unlike companies, the latter do not go under following an insolvency, and the creditors can pursue further enforcement measures against such “natural persons”. The term “personal bankruptcy” is actually misleading, while it has, however, become established. Actually, the latter concerns a special form of the insolvency proceedings for all natural persons (i.e. not for companies).

For consumers, initially an extrajudicial attempt at achieving a settlement is mandatorily stipulated. In the course of the latter, the debtor needs to formulate a settlement proposal and submit it to the creditors. The latter need to respond to the proposal within a “reasonable” period of time (a maximum of six weeks). If all the creditors agree, the extrajudicial settlement materialises and no insolvency proceedings are instituted.

Should the attempt at a settlement fail, the consumer may file an application for the institution of insolvency proceedings with the district court having jurisdiction for his or her usual place of residence (Sec. 182 Austrian Insolvency Code (IO)).

The aim of the judicial proceedings is then to give honest and motivated debtors the opportunity to get off to a new economic start. The prerequisites for the latter include the actual inability to pay, regular income, an undertaking not to create any new debts, and being able to make a certain amount available each month for repayment.

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