From 1 January 2022, low-income and financially disadvantaged persons will have the opportunity to discharge their debts

On Tuesday, 15 June, the Saeima approved, at its final reading, the bill drafted by the Ministry of Justice and four related bills concerning the release of a natural person from debt obligations. The purpose of the bill is to give persons living in low-income and financially disadvantaged households whose income is insufficient to cover all their obligations due to their social and economic circumstances the opportunity, from 1 January next year and in accordance with the prescribed procedure, to discharge debt obligations arising from a consumer credit agreement within the meaning of the Consumer Rights Protection Law.

Deputy Prime Minister and Minister of Justice Jānis Bordāns: “We cannot guarantee that persons who are currently stuck in the quick-loan quagmire will not end up there again, but it is our duty to give them an opportunity to escape it. This opportunity may be used only once, and the bill stipulates that the costs of the debt-discharge process will be covered from private individuals’ funds and that this process will have no adverse impact on the state budget.” 

The Ministry of Justice points out that the natural-person insolvency procedure currently provided for in the Insolvency Law is relatively expensive and is not applicable to persons whose debt obligations amount to up to EUR 5,000. Consequently, low-income persons have no legal means of resolving their solvency problems.

An application for release from debt obligations will be assessed by a sworn notary; however, before being released from their debt obligations, a natural person will be required to complete financial-literacy courses organised by the State Employment Agency, and the debtor will also have to continue fulfilling their obligations. Release from debt obligations may be used only once.

The bill stipulates that a natural person may be released from debt obligations if eight conditions are met simultaneously; for example, during the previous year, the debtor’s average monthly income must not have reached the minimum monthly wage established in the country, and the person must have held low-income or financially disadvantaged household status for at least three months. Last year, low-income household status was granted to 37,464 persons, while financially disadvantaged household status was granted to 43,770 persons.

More information - https://www.tm.gov.lv/lv/jaunums/no-2022-gada-1-janvara-trucigam-un-maznodrosinatam-personam-bus-iespeja-dzest-paradsaistibas

Author:

Ministry of Justice

tm.gov.lv