The topic of personal insolvency has been addressed by us on multiple occasions.
For easier reference, we attach links to our previous publications:
2.
On 19 June 2025, the Personal Insolvency Act was voted on and adopted at second reading.
However, applications for declaration of insolvency will not be accepted immediately upon the entry into force of the Act. Such applications may be filed no earlier than nine months following its publication in the State Gazette, and this is subject to the issuance of an order by the Minister of Justice for the commissioning of the new module for personal insolvency proceedings in the insolvency register.
1. Who may be declared insolvent?
Any “debtor acting in good faith” who has been unable to pay due monetary obligations amounting to more than 10 minimum monthly wages (currently BGN 10,770) for a continuous period exceeding 12 months may want to be declared insolvent.
What does the term “debtor acting in good faith” (or “bona fide” debtor) mean?
The“debtor acting in good faith” term means a debtor who undertakes obligations in accordance with their property status and income, and whose conduct does not harm the interests of creditors.
This implies that there are circumstances under which a debtor may be deemed not “debtor acting in good faith”. The Act provides for 11 statutory grounds in which a debtor may be considered non-bona fide, and under these grounds, the debtor can not initiate insolvency proceedings.
Some of these grounnds include:
- the debtor is able to work but has not engaged in any lawful employment or income-generating activity for a year prior to filing the insolvency application without cause, irrespective of the manner of assignment or performance of such activity;
- within three years prior to the filing of the insolvency application, the debtor has violated obligations related to declaration of income or assets;
- the debtor has disposed of assets in a manner where the value of assets given significantly exceeds the value of assets received, within three years prior to filing the insolvency application or after filing but before the court ruling to open insolvency proceedings;
- The debtor has disposed of assets of significant value in favor of a related party or has engaged in other acts detrimental to creditors within two years prior to the filing of the insolvency petition or after filing but before the court ruling to open insolvency proceedings.
2. Initiating the proceeding
Only the person – the debtor – may request to be declared insolvent.
This is done by filing an application with the regional court at the debtor’s current address.
The application must be accompanied by a declaration containing information about the following:
Additionally, the debtor may propose a repayment plan, though such a plan may also be prepared later by the insolvency trustee.
- income;
- assets;
- marital status;
- creditors, payments made to them, and relevant supporting documents.
3. Who participates in the proceeding?
In addition to the debtor, all creditors holding claims against the debtor participate in the proceedings, regardless of the type or time of arising of such claims. The Act sets out a specific order of satisfaction of creditors’ claims.
4. Regarding the proceeding before the court
If the court finds that all legal requirements are met, it shall issue a ruling to open insolvency proceedings.
Following the opening of insolvency proceedings, the court appoints an insolvency trustee. From the moment the proceedings are opened, the debtor may not enter into new transactions for management or disposal of assets, nor make payments without the trustee’s permission.
This restriction does not apply to payments related to the debtor’s basic living needs, including payments to the budget, utility suppliers, essential expenses for food, healthcare, education, social services, and others, up to the amount provided for the debtor’s subsistence.
Once the proceedings are opened, all payments received by the debtor are considered received by the trustee and must be made through a special bank account.
The Act provides for the acceptance of a repayment plan, which may foresee deferment or installment payments for a period of up to three years, partial or full debt forgiveness, and the execution of other actions and transactions with the debtor’s assets aimed at satisfying the insolvency creditors.
5. Purpose of the proceeding
The main objective of the proceeding is to relieve the debtor of obligations that cannot be fulfilled. The Act stipulates that through the execution of the repayment plan, all obligations covered by it, whether partially or fully forgiven, are discharged.
Our team will diligently monitor the promulgation of the Act and the date on which it enters into force.
The article above is for information purposes only. It is not a (binding) legal advice. For a thorough understanding of the subjects covered and prior acting on any issue discussed we kindly recommend Readers consult Ilieva, Voutcheva & Co. Law Firm attorneys at law.
