16 November, Bratislava – An amendment to the Act on Bankruptcy and Restructuring will facilitate reintegration of the homeless into society. The amendment had input from the working group of lawyers from the Pro Bono Attorneys programme and OZ Proti Prúdu (civic association), the publisher of Nota Bene magazine. 

The growing issue of homelessness in Slovakia has resulted in a need to introduce systemic changes in the process of discharging debt. “Nowadays, people who occasionally work on an illegal basis are not motivated to start working legally, because their salary could be quickly seized by a judicial officer. Therefore, the prospects for their social reintegration and the improvement of their financial situation are practically non-existent. A debt discharge would solve their dire financial situation. However, the current cost of this process is €1,659.70, so it is far from being accessible to people on a low income,” explained Silvia Belovičová from the Squire Patton Boggs law firm. “Even though these people are employed, their financial situation is not improving. So, logically, they lack the effort to resolve this. On the other hand, they would try it, but their difficult situation and our laws make any resolution impossible,” Martin Provazník from the law firm bnt attorneys-at-law said in explaining the situation of many of the homeless. The aim of the working group’s cooperation was to facilitate the process of debt discharge and make it available for the homeless, as well as for others, as it would consequently increase their chances of finding a job and allow them to reintegrate themselves into society.

The amended act facilitates debt discharge for the wider public

The working group that dealt with the amendment to the Act on Bankruptcy and Restructuring included the lawyers Silvia Belovičová and Martin Provazník, and Ivan Lorenc from OZ Proti Prúdu (civic association), which is the publisher of Nota Bene magazine. This cooperation was the result of a long-term effort at the systematic resolution of the problem of homelessness, which is one of the main goals of OZ Proti Prúdu. In cooperation with the White & Case law firm, the working group started examining legal regulations in some European countries where there exist examples of processes of debt discharge for those who are without any property, the so-called NINA (No Income No Asset) group of people. Subsequently the members successfully engaged a task force at the Ministry of Justice of the Slovak Republic and were able to directly influence the preparation of the new amendment to the Act on Bankruptcy and Restructuring. The Government of the Slovak Republic adopted this act in late September, and it shall enter into force next year in March.

“The goal was to make the option of debt discharge available to those who would be otherwise impeded in this process by their lack of assets, and we succeeded. This means that the homeless will be able to pay off their debts, even though their assets will not entirely cover the expenses,”explained Provazník, adding that people who are unable to pay their debts will have two options starting next year:“The first one is a debt payment schedule where the debtor has to pay some of his debt in a given amount of time. Our laws in this case mostly look after people who have assets and are able to at least partially pay their debt. The debtor thus keeps a part of his assets and pays the debt gradually over a given period. However, they don’t have to pay off the debt completely.”Ivan Lorenc pointed out that this is not the best option for the majority of homeless people:“When we consider the income of these people, which is mostly around the minimum monthly wage, and the amount of debt they have, often over €5,000, they are surely unable to pay 30% of their debt over a period of five years given their income.”

The conversion of assets (if they own any) into cash is more suited for the homeless. However, Lorenc added that not even this second option is ideal for them.“They still have to pay the liquidator’s remuneration, the amount of which is not stipulated by law. This means that the homeless will have to put aside some money or obtain a loan from the Centre for Legal Aid. No one is certain of the conditions set by the Centre for Legal Aid yet. I personally don’t think that it’s appropriate to put the homeless into more debt again,”explained Lorenc, who added,“Some of them are probably able to save up €660, but it won’t happen overnight. I don’t expect that all of them will pay off their debts, it will take a long time.”

One of the achievements is access to health care and representation by a legal aid centre

According to the lawyer Silvia Belovičová, one of the positives that the new act will include is the representation of the debtor by the Centre for Legal Aid. The centre will provide free legal aid for people who qualify according to criteria set by the act, and thus the debt discharge process will be accessible to those who have no property, since they would otherwise not be able to afford a lawyer. Ivan Lorenc sees the change in the Health Insurance Act pushed forward by the working group as an accomplishment.“Until now, a person going through the debt discharge process didn’t have access to full health care. We pointed this out and successfully added a change to the new Health Insurance Act, meaning that even a person that is paying his debts using the debt discharge process will have full access to health care,”explains Lorenc. During the amendment’s preparation, the Pro Bono Attorneys team tried to introduce to the act a definition of a specific group of the homeless for whom the debt discharge process would be free.“There is no definition of ‘homeless people’ in any government strategy plan or elsewhere. It was difficult to determine who this change should apply to. We proposed to define them as persons who are in material need and who are being assisted by crisis intervention services, such as homeless shelters, refuges, and street work. Unfortunately, we did not succeed,” Lorenc added. 

They are helping the homeless with the debt discharge process

“We think that after two years of hard work the lawyers achieved some big changes in the amendment of the act, and we believe that thanks to the planned changes the integration into life and society will be easier for those who are devoid of property or assets,”said Barbora Pálešová, coordinator of the Pro Bono Attorneys programme at the Pontis Foundation. Working with the lawyers began in 2014. Since April 2016 they have been regularly participating in task force sessions aimed at preparing a new act at the Ministry of Justice of the Slovak Republic. While analysing and preparing the amendment, the lawyers also looked at how countries such as Finland, Sweden, Germany, Spain, the United Kingdom, and the United States are dealing with the issue.