Private bankruptcy again takes five years: Special regulation from 2021 has expired

Debt counseling services had urgently pointed out the consequences in advance. Clemens Mitterlehner, managing director of the umbrella organization of debt counseling services, sharply criticized the government's approach: "Wenn sich sogar die Fachebene im Justizministerium dafür ausspricht, dass die dreijährige Entschuldung dauerhaft für alle gelten soll, dann ist es schon seltsam, wenn die Regierung alle Bedenken ignoriert".

Criticism from debt counseling services

Mitterlehner also warned of the practical effects of the expiration of the special regulation. "Viele Menschen befinden sich unter anderem wegen der Teuerungen in einer wirtschaftlich schwierigen Lage – besonders diese Menschen brauchen eine gute Perspektive und keine Verschärfungen", he said. Shorter proceedings were also less costly for the state, as they involved less administrative effort.

Critics accuse the government of having failed to find a timely solution. "Dieses aufwändige Prozedere hätte man sich ganz leicht ersparen können, wenn man rechtzeitig agiert hätte", it is said from circles of the debt counseling services. The already burdensome phase of debt discharge is being made additionally more difficult by the return to the longer deadline.

Effects on those affected

The background is a broader debate on the modernization of private insolvency law in Austria. An EU directive on the harmonization of insolvency proceedings as well as the Constitutional Court had also already addressed questions of proceeding duration. In this context, compromise proposals had been developed, which however did not result in a successor regulation.

Those affected whose proceedings were begun under the old special regulation can, according to the current state, still complete them. Anyone, however, who initiates a private bankruptcy proceeding from now on will in principle fall back into the longer five-year deadline.

The creditor protection associations, including the Gläubigerschutzverband, had likewise advocated strongly for a permanent solution. They see, through the return to the longer proceeding duration, the danger that fewer affected persons will embark on the path to debt discharge at all, since the prospect of a quick fresh start is lacking.

The discussion falls in a phase of rising costs of living, which, according to experts' assessment, further increases the pressure on private households. Against this background, social organizations and debtor counseling services are demanding that the shorter deadline be permanently anchored or that at least an immediate transitional solution be created.

Political and legal classification

In the Ministry of Justice, which was most recently under Justice Minister Alma Zadić, support for maintaining the three-year deadline had likewise been signaled according to debt counseling services. A final political decision is, however, still pending, so that those affected must for the time being prepare for the longer proceeding durations.

Constitutional challenges against the longer proceeding durations had already been a topic in the past. The Constitutional Court had addressed the duration of private bankruptcies in several proceedings, without however forcing a fundamental reform. Observers expect that the renewed tightening could once again fuel the legal dispute over private insolvency law.

Overall, the case shows how the expiration of a temporary special regulation without a successor can have profound practical consequences. For many debtors, the return to the five-year deadline means a noticeable deterioration of their prospect of an economic fresh start.