RIGA - President Valdis Zatlers has promulgated the Insolvency Law that the Saeima passed on July 26, which means that the law will come into force on Nov. 1 this year, reports news agency LETA. Zatlers noted that the President’s Chancery had not received any petitions requesting that the law not be promulgated, and neither has the government. He considers the law endorsed by the Saeima as a compromise, and the president is pleased that the parliament has taken into consideration his previous objections to the bill.
The president emphasized that the new law gives honest individuals who have become insolvent, for economic or social reasons, an opportunity to start a new life. However, the state must watch that persons declared insolvent do not declare as low incomes as possible so as to reduce their monthly payments during the insolvency process.
Zatlers points out that insufficient control over debtors’ actual incomes may contribute to growth of the shadow economy. Taking into account that control over insolvent individuals will be regulated not by the Insolvency Law but other laws and regulations, Zatlers repeatedly requests the Saeima to continue work on improving such control and monitoring mechanisms.
The law now provides that the schedule of debt write-offs for individuals will depend on the person’s projected income during the insolvency procedure. It will provide that, in case a borrower’s income is sufficient to cover at least 50 percent of total liabilities remaining after the completion of the bankruptcy procedure (the sale of the mortgaged property), the person’s liabilities will be written off in one year after the launch of the insolvency process.
If a borrower is unable, for reasons beyond his or her control, to pay the remaining debts, but the borrower’s income is sufficient to cover at least 35 percent of total liabilities after the bankruptcy procedure concludes, the borrower will be given two years to settle their liabilities.
Debtors with enough income to cover at least 20 percent of their liabilities after the bankruptcy procedure will be given three years to settle remaining debts after they are declared insolvent. Furthermore, if a borrower’s total liabilities do not exceed 100,000 lats (142,800 euros), the moment he or she is declared insolvent, one-third of the debtor’s income, but no less than one-third of the official minimum monthly wage, will be used to cover the person’s debts to the lender for two years after the declaration of insolvency.
Borrowers will only have to repay the principal; all contractual penalties will be waived. Borrowers will also have to pay the unpaid interest amount, calculated the day they are declared insolvent, but the interest rate must not exceed six percent a year.