On 21 July 2017, a draft bill on the protection of over-indebted natural persons was submitted to the Bulgarian Parliament (the “Bill”). The Bill introduces a new legal framework to address personal over-indebtedness and to protect indebted persons from a lifetime of indebtedness while ensuring a fair satisfaction of creditors.

Under the Bill, a natural person shall be deemed to be over-indebted when their property and reasonably expected income for the next ten years are not sufficient to cover their existing debts. Under the Bill, such over indebted persons will be protected if: they have worked under an employment or service agreement throughout the last three years; have one or more debts, which all together do not exceed BGN 150,000 (approx. EUR 77,000); and make all of their property and their future income for the next ten years (except the property which is not subject to insolvency by operation of the law) available to their creditors.

Foreign natural persons, who are tax residents in Bulgaria (i.e. reside in Bulgaria more than 183 days per year) may receive the same protection under the Bill as Bulgarian citizens.

The procedure under the Bill

Upon receiving the request from an over-indebted natural person, the relevant court shall notify the creditors of the over-indebted person about the request and invite the creditors to provide a written statement. The court then has one month to issue its decision on whether or not the person qualifies as being over-indebted.

All obligations of the over-indebted person shall become due and payable from the date of the court decision. In its decision, the court will specify a special bank account, to be opened in the name of the over-indebted person, into which the over-indebted person shall deposit all funds owned by him (except for such funds, which, by operation of law, are not subject to insolvency proceedings). The funds in the account shall serve as the satisfaction of the creditors. If there are any remaining funds, which have not been utilized upon satisfaction of all creditors and expiration of the ten-years, those unutilized funds will be returned to the over-indebted person.

Over-indebted persons are prohibited from disposing of their property (except where permitted by law) and are obligated to maintain their property with а reasonable duty of care for 10 years from the date of filing their requests. Further, over-indebted persons are not allowed to participate in legal companies or to be elected in management bodies for 10 years term from the date of the court decision.

The new Bill will go through the parliamentary approval procedure and presumably enter into force on 1 January 2018.