Personal bankruptcy and its social implications

The paper discusses insolvency of households and deals with the ways of solving the insolvency through debt relief. Personal debt of Czech population increases annually by 30 % and a personal bankruptcy is a new debt relief treatment. The greatest risk of indebtedness occurs in low-income groups that use system of loans to improve their financial situation. Within this debtors’ group there occur some kind of overestimation of their own income potential, which cause a situation where the permanent insolvency is handled through another loans.

As a research tool there was used questionnaire survey. Research sample covered 50 individuals to whom the court ordered debt relief in the form of payment schedule. Information about debtors (age, sex, marital status, source of income, amount of all debts) was obtained from Insolvency Register. The survey showed that the total debt was around hundreds of thousands CZK. The largest share of borrowers represented those, whose debt ranges from 300 to 599 thousand CZK.

There was not confirmed any relation between gender and debts as the proportion of indebted women and indebted men was equal. The largest sample of debtors consisted of married people aged 30-39 years. As a possible reason shall be stated their efforts to ensure the family and to settle their housing issues. Furthermore shall be acknowledged their lack of experience in family cash flow management.

The major source of income for debtors was their salary (16 500 CZK = 650 EUR in average). The average fulfilment of debts was 66.48 %, but obviously only around 30-49 % of total debt is fulfilled.

* This paper is one of the research outputs of project TD 010093 registered at the Technological Agency of the Czech Republic