Innsbruck, 2017-05-31

Part of the current insolvency law amendment 2017 (IRÄG 2017) is also a reform of private bankruptcy. Its core is a fundamental transformation of the absorption procedure – a debt relief of last resort for debtors in Austrian law. At the moment, this procedure normally lasts 7 years and should be reduced to 3 years.

Furthermore, the minimum quota of 10 % of the insolvency claims which is so far required for the residual debt discharge is to be abolished. The reasons for these changes are, above all, the difficulties former entrepreneurs face to raise the minimum quota of 10%. The faster debt relief is intended to prevent a debtor from being pushed into economic and social isolation. To achieve an opening of insolvency proceedings in the absence of cost-covering assets, the obligation to attempt an out-of-court settlement should be abolished. Hence, in the future a residual debt discharge can also be granted if the creditors do not obtain a quota at all. Debtors no longer must apply for a so far mandatory payment plan, if they are unlikely to obtain any seizable income or an income that only slightly exceeds the minimum subsistence level within a 5 year observation period. In this case, the introduction of an absorption procedure may immediately be applied for.

The intended reform of the absorption procedure is very controversial. Creditor protection associations point out that as a result of the proposed amendment to the Act, earned income will become decreasingly important as a collateral for a credit so that even more restrictive lending may be expected. The payment practice will certainly decrease if there is an opportunity to achieve debt relief even with a zero quota. In contrast, debt counselling services are extremely pleased with the planned amendment as they could also relieve those from debts who own or earn very little.

The intended amendment of the IRÄG 2017 shall enter into force on 1^st July 2017. However, this is highly uncertain due to the current discrepancies within government and parliament.

Author: Dr. Peter Waizer, attorney at law

Rechtsanwälte Waizer & Waizer Regiegemeinschaft