Hungarian gov't amends the rules on private bankruptcy

The new decree amends the regulation on assets and income not included in the debt settlement, by revalorising the limits of the debtor's income according to the latest consumer price index published by the Central Statistical Office (KSH), below which the debtor's income is not considered to be part of the assets of the bankrupt, and the debtor is therefore free to use these amounts.

The decree also amends the regulation on the determination of reasonable housing needs and rent or rent for the use of housing in debt settlement proceedings for natural persons, taking into account changes in property prices and rent published by the KSH.

Between the adoption of the Family Bankruptcy Protection Act in 2015 and 2021, more than 2,000 bankruptcy protection proceedings were opened in Hungary. There was a big change in the private bankruptcy rules at the time: until then, the debtor had to have 100% of the debts to be eligible for private bankruptcy, which was then reduced to 80% by an amendment to the law.

Despite the relaxation, it seems that not many more people have taken advantage of the opportunity since then, at least the number of entrants cannot have exceeded the number of those who have left the scheme, as the impact assessment of the public consultation revealed that

around 2,070 debtors and their relatives are affected by family bankruptcy protection.

Meanwhile, despite three quarters of recession in Hungary, the labour market is still very strong, and Hungarians are able to repay their loans. According to recent data from the MNB, 1.5% of retail bank loans are still over 90 days overdue, compared to over 15% ten years ago.

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