Consumer bankruptcy

Consumer bankruptcy proceeding can only be opened if the consumer is insolvent.

On the first day of 2016, the institute of consumer bankruptcy was introduced into the legal order of the Republic of Croatia with the aim of developing a system that will result in creating conditions for insolvent consumers to reschedule their obligations or start anew, and enable creditors to settle their claims evenly.

The consumer in terms of the institute of consumer bankruptcy is defined in the Consumer Bankruptcy Act.

The consumer is unable to pay if:

  • he is unable to meet due financial obligations (insolvency) or
  • he cannot fulfill one or more due financial obligations in the total amount of more than 3.981,68 EUR /  30.000,00 HRK (insolvency assumptions) for at least 90 consecutive days.

Consumer bankruptcy can end:

  • out-of-court proceeding (mediation) or
  • court proceeding:
    - by court settlement or
    - consumer bankruptcy and a conduct review period.

Out-of-court procedure (mediation)

It is initiated by the consumer or each of his creditors with the explicit consent of the consumer upon request (on the prescribed form), and is conducted by an intermediary in the counseling center (Financial Agency (FINA) branch or other persons licensed to perform counseling).

Branches of the Financial Agency that perform the activities of counseling:

  • Bjelovar Branch, 43000 Bjelovar, Frana Supila 4
  • Čakovec Branch, 40000 Čakovec, O. Keršovanija 7
  • Dubrovnik Branch, 20000 Dubrovnik, Vukovarska 2
  • Gospić Branch, 53000 Gospić, Kaniška 4
  • Karlovac Branch, 47000 Karlovac, Pavla Vitezovića 1
  • Koprivnica Branch, 48000 Koprivnica, Opatička 1
  • Osijek Branch, 31000 Osijek, L. Jagera 1-3
  • Požega Branch, 34000 Požega, Trg Sv. Trojstva 19
  • Pula Branch, 52100 Pula, Giardini 5
  • Rijeka Branch, 51000 Rijeka, F. Kurelca 3
  • Sisak Branch, 44000 Sisak, I. K. Sakcinskog 1
  • Slavonski Brod Branch, 35000 Slavonski Brod, Petra Krešimira IV. no. 20
  • Split Branch, 21000 Split, Mažuranićevo šetalište 24 b
  • Šibenik Branch, 22000 Šibenik, Perivoj L. Maruna 1
  • Varaždin Branch, 42000 Varaždin, Augusta Cesarca 2
  • Velika Gorica Branch, 10410 Velika Gorica, Trg kralja Tomislava 33
  • Virovitica Branch, 33000 Virovitica, Trg kralja Tomislava 3
  • Vukovar Branch, 32000 Vukovar, Olajnica 19
  • Zadar Branch, 23000 Zadar, Ivana Danila 4
  • Zagreb Branch, 10000 Zagreb, Ulica grada Vukovara 70
  • Zlatar Branch, 49250 Zlatar, Gajeva 7.

The consumer, ie the creditor who initiates the procedure, may choose the branch office of the Financial Agency in which he will submit a request for initiating out-of-court bankruptcy proceedings of the consumer regardless of the place of residence.

The request is accompanied by:

  • a list of assets and liabilities (on the prescribed form)
  • proof of the existence of a bankruptcy reason
  • documents from which the probability of the existence of the claim arises (attached by the creditor if he initiates the procedure)
  • explicit consent of the consumer to conduct the out-of-court procedure (attached by the creditor if he initiates the procedure).

The costs of out-of-court proceedings are covered from the advance paid.

The deposit is paid by the applicant in the amount of 39,82 EUR / 300,00 HRK. If the applicant is a consumer, he may be released from the obligation to pay an advance in the manner and under the preconditions prescribed by special regulations governing free legal aid.

The plan of fulfillment of obligations (on the prescribed form) contains:

  • amount of consumer's obligations 
  • percentage of reduction of obligations 
  • payment amount
  • payment deadlines
  • the manner of fulfilling obligations to each creditor
  • proof of payment of an advance in the amount of 39,82 EUR / 300,00 HRK for the costs of out-of-court proceedings, ie a decision on approved free legal aid.

After the advance payment has been made and the fulfillment plan has been drawn up, the counseling center publishes an invitation to participate on the FINA website without delay, whereby the delivery is considered completed.

The invitation to participate is not delivered personally by the counseling center to the creditors and it is obligatory to warn the consumer about this, as well as the fact that the consumer has the possibility to inform the creditors about the time and place when they are invited to join the counseling center.

All forms will be available at the premises of the counseling center and on the website of the e-Court Notice Board.

The out-of-court procedure lasts for a maximum of 30 days from the day of the meeting (specified in the invitation to participate).

In exceptional cases, the counseling center may extend the deadline by an additional 30 days if: 

  • they assess that there is a possibility of concluding an out-of-court agreement between the consumer and all his creditors or
  • the consumer and all his creditors agree to extend the out-of-court proceedings.

An out-of-court agreement (on the prescribed form) between the consumer and the creditor: 

  • has the effect of an out-of-court settlement
  • represents an enforceable document
  • has no legal effect on creditors who have not participated in it.

An out-of-court agreement is deemed unsuccessful if any of the creditors (after the release of the invitation to participate): 

  • declares that he does not wish to take part in the out-of-court proceedings or
  • initiates or continues the procedure for the purpose of enforcing his claim.

The counseling center will issue a confirmation to the consumer without delay that the attempt to conclude an out-of-court agreement has failed

Judicial proceeding

It is initiated at the consumer's proposal before the competent municipal court in whose territory the consumer resides.

The proposal for opening consumer bankruptcy proceedings will be accompanied by:

  • list of assets and obligations (completed form from the counseling center)
  • plan of fulfillment of obligations (completed form from the counseling center).

The costs of the consumer's bankruptcy proceedings are advanced by the consumer in a lump sum determined by the court (it cannot be less than 132,72 EUR / 1.000,00 HRK), while each creditor bears his own costs of the proceeding.

If the consumer is unable to advance the costs of the proceeding, and:

  • has assets, the court may decide to advance the costs of the proceedings from the budget, which will then be reimbursed to the priority from the liquidated consumer's assets 
  • has no property, he can be released from the obligation to pay an advance.

Letters in consumer's bankruptcy proceedings are published via the e-Court Notice Board. 

The delivery of the writ was done on the eighth day from the day of the publication of the writ via the e-Court Notice Board.

The court procedure can be divided into three phases:

  • preparatory hearing - begins with consideration of the performance plan, and the accepted plan has the effect of a court settlement
  • opening of consumer bankruptcy (if the court determines the existence of a bankruptcy reason and if the plan of fulfillment of obligations was not accepted at the preparatory hearing):
    - there is consumer,s property and the court issues a decision on opening consumer bankruptcy and appoints a commissioner,
    - there is no consumer's property and the court makes a decision on the simultaneous opening and conclusion of the proceedings, appoints a commissioner and determines a behaviour check period of five years
    - behaviour check period.

Behaviour check period

Behaviour check period may not be less than one year, nor more than five years.

During the behaviour check period the commissioner cashes and distributes the consumer's property in accordance with the final distribution list and disposes of property rights in the name and on behalf of the consumer.

The consumer is obliged to inform the court and the trustee about his work or his efforts to find a job, hand over the property acquired by inheritance to the trustee and notify the trustee without delay of any change of residence or place of employment.

The consumer may propose not to sell the real estate he needs for housing until the end of the behavioural check period if he does not own another real estate and has no other accommodation available, nor is he able to provide it.

The court will deny the consumer release from the remaining obligations:

a) at the proposal of the bankruptcy creditor, if the consumer violates his duty during the period of verification of conduct and thus prevents the settlement of the creditor, ie if the consumer:

  • is convicted of a criminal offense against property, business or other criminal offense which would indicate his negligence and dishonesty in the performance of his obligations and duties
  • in the last three years, preceding the filing the motion to open consumer bankruptcy proceedings or thereafter intentionally or through gross negligence, provided inaccurate or incomplete information about his financial situation in order to obtain credit, received payments from public funds or avoided paying taxes or other public obligations
  • in the last three years before filing the motion to open consumer bankruptcy proceedings or thereafter intentionally or negligently prevented the settlement of creditors by undertaking inappropriate obligations, negligently and unfairly reduced the value of their assets or postponed the opening of bankruptcy proceedings without prospects for financial improvement
  • during the proceedings intentionally or through gross negligence violated his duties of reporting and cooperation under the Consumer Bankruptcy Act
  • intentionally or with gross negligence stated incomplete and inaccurate data in the list of assets and liabilities.

b) if the consumer fails to provide the requested information without a valid reason or if he is unjustifiably absent from the hearing scheduled by the court for the purpose of giving the information.

If the preconditions for making a decision on denial of release from the remaining obligations are not met, the court will release the consumer from the remaining obligations.

With the decision on release from the remaining obligations, the consumer cannot be released of:

  • legal obligations to support children, parents and other persons whom he is obliged to support by law
  • restitution of proceeds of crime or misdemeanor
  • compensation for damage caused by a criminal offense or misdemeanor
  • compensation for death or serious body injury.

Exemption from the remaining obligations has legal effect in relation to all creditors, including creditors who have not filed a claim in the consumer bankruptcy proceedings.

After the ending of the behaviour check period, the bona fide consumer will be released from the obligation to the creditors.

At the proposal of the creditor, the court may also issue a Decision on the revocation of the consumer's release from the remaining obligations if:

  • it subsequently establishes that the consumer has violated any of his duties or
  • thereby significantly has prevented the settlement of creditors.

A proposal for revocation may be submitted within one year from the finality of the decision to release the consumer from the remaining obligations.