Unlike most countries in the region, Serbia is still hesitant to adopt the Personal Insolvency Act (the “Act”). However, it seems that there is progress in this field as part of the amendments, which are currently being drafted, of the Strategy for Settlement of NPLs.
It is envisaged that the Act will regulate an insolvent debtor who is not able to repay a loan and/or other debts. Under the Act, such debtor could declare his/her insolvency and settle the obligations towards the creditors through sale of his/her property and appointment of an insolvency manager, who would be in charge of his/her finances. In addition to the assets which are exempt from execution, the debtor should be left with the existential minimum of monthly income.
Essentially, the aim of the Act is to differentiate the “honest” from “culpable” debtors. Furthermore, the goal is not only to provide the former with the opportunity to settle his/her obligations towards the creditors, but also to enable him/her a “fresh financial start”.
There are two concepts of personal insolvency – Anglo-Saxon and Continental, and Serbia leans towards the second one, which was also accepted by Slovenia, Croatia, and most recently Montenegro. Contrary to the prompt Anglo-Saxon model, the Continental concept comprises of a thorough repayment plan, it does not include a debt write off and could last for years. However, according to the current Strategy for Settlement of NPLs, this kind of complex legal framework is not yet a priority.
Finally, it is worth noting that not much has changed in the regional countries since their respective legislation entered into force. In spite of tens of thousands of insolvent debtors in each of the neighboring countries, only a handful of citizens have used the “benefits” of these laws. This is not only due to numerous lacunas in the legislation, but also due to the lack of information among the debtors unaccustomed to this kind of legal solutions.
To conclude, having in mind the regional experiences, it is safe to assert that the Serbian legislator will take more time to come up with the right model, hopefully adapted to the needs and capacities of its citizens, economy and existing legal mechanisms.
By Milan Samardzic, Partner, and Nikola Kasagic, Senior Associate, SOG / Samardzic, Oreski & Grbovic
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