Personal bankruptcy has been introduced for the very firstvery first time in Montenegro. The Personal Bankruptcy Act entered force on 22 August 2015.
The brand-new law applies to customers. Customer is defined as an individual getting inbecoming part of an industrial transaction outside his/her industrial or professional activity. Subsequently, an individual acting in his/her capability of private entrepreneur or professional is not covered by the definition of consumer. However, personal bankruptcy may be started over a private business owner or an artisan who: (i) has no more than 10 creditors, (ii) has a financial obligation that does not exceed EUR 15,000, (iii) has no commitments to its staff members, if any, and (iv) is not currently subject to routine insolvency procedures as a business entity.
Personal bankruptcy proceedings can be submitteddeclared if the customer is insolvent, by the customer himself/herself or by a creditor. The consumer is considered to be insolvent in case he/she (i) has been in hold-up with the fulfilment of several payment responsibilities for a period of more than 6 months, which obligations in total go beyond seven times the quantity of the customers wage or other frequently gotten income, or (ii) is jobless for more than five months and his/her past due payment commitments go beyond EUR 2,500.
Personal bankruptcy proceedings include three stages: out-of-court settlement, in-court settlement phase and bankruptcy.
A 60-day out-of-court negotiation period is a compulsory condition to declare customers individual bankruptcy. This stage, taking placehappening before a mediator, can be extended for another Thirty Days. The consumer is obliged to make a plana prepare for debt settlement and a list of possessions. The list of assets includes all existing assets, earnings and liabilities of the customer, a list of lenders, a list of claims, anticipated earnings and expected inheritance. Any out-of-court settlement requires consent of and should incorporate all lenders otherwise it is null and space. If out-of-court settlement is licensed before a notary, it represents a directly enforceable instrument.
If out-of-court negotiation yields no settlement with lenders, the customer or any lender can petition the court to proclaim the consumer broke. If the customer files for personal bankruptcy, it needs to submit to the court a financial obligation settlement plan.
Treatment for individual bankruptcy is immediate. Nevertheless, phase 2 may be suspended for a period of three months pending settlements between the debtor and its creditors. At the initial hearing, the financial obligation settlement plan, if any, is considered and put to vote by the creditors. Lenders whose claims are not included in the financial obligation settlement plan might register their claims within 30 days from the statement of the initial hearing. If the financial obligation settlement strategy is accepted, the petition for the opening of bankruptcy procedures is considered to be withdrawn. Debt settlement strategy should be accepted by all creditors. Lenders that do not oppose the strategy within the statutory due date are considered to have actually accepted the plan. If the bulkmost of creditors support the strategy, the court might enact a decision changing the approval of dissenting creditor(s) after it hears the dissenter(s). The plan accepted by the lenders has the force of a court settlement.
Opening of bankruptcy procedures
If the creditors do not approve of the debt settlement strategy, the court shall open formal bankruptcy procedures and appoint a bankruptcy administrator. This decision might be appealed. The lenders can register their claims no laterbehind within 30 days from the opening of bankruptcy proceedings. If the administrator dismisses a creditors assert, the creditor may initiate litigation seeking a declaration that the claim exists.
The bankruptcy estate includes all assets of the customer, including those obtained during the proceedings, or during the period of excellent conduct (see below), except for the building that is exempt from enforcement under the basic enforcement law. Any disposal by the customer with his/her assets after the opening of bankruptcy proceedings is null and space. The customer topic to bankruptcy may not take loan, provide surety or maintain a payment account without the approval from the court. The consumer may not begin a private company or engage as a freelancer without the approval from the court. Before providing the approval, the court is obliged to look for a viewpoint from the creditors and the administrator. The customer might petition the court to accept separation of the assets needed for the private business from the bankruptcy estate. The consumer must pay to the estate a month-to-month fee for the useusing those possessions, which can not exceed 0.5 % of the market value of the possessions.
The bankruptcy administrator is responsible for sale of the debtors assets and distribution of the proceeds to the creditors on apro ratabasis.Secured lenders are in charge of liquidating the collaterals owned by the debtor. Nevertheless, if a protected creditor does not liquidate the security within the due date determined by the court (60 days), the right to liquidate the collateral transfers on the administrator. Neither the secured lender nor the bankruptcy administrator may sell the secured asset for less than 50 % of its approximated value.
Transactions carried out by the consumer prior to the opening of bankruptcy proceedings which undermine the concept ofpro ratasettlement of lenders or otherwise prefer one or more creditors can be challenged by the administrator. The law does not limit the suspect period, which impliesmeanings that that any transaction can be challenged, regardless of when it was carried out.
The bankruptcy administrator draws up a last list of acknowledged claims. If the customer makes a proposition for financial obligation discharge, the court figures out the duration of great conduct, which lasts no less than two years and no more than seven years. During that duration, the consumer may not decline any work for which it is qualified, including seasonal work. It needs to hand-over to the administrator 50 % of any inheritance profits. After the expiration of that duration, and offered none of the challenges preventing financial obligation discharge, as stated in the law, exist, the court makes a choicedecides on discharge of the financial obligation which continues to be uncertain after liquidation of the debtors possessions. Financial obligation discharge has impact to all lenders, including those who did not register their claims in bankruptcy procedures. Financial obligation discharge does not incorporate liabilities for kid or father and mother assistance, those arising from unlawful gains or criminal offenses and tax liabilities. An unique computer registry of debtors whose debts have actually been released will be established.