Reorganisation is intended primarily for large enterprises with a turnover exceeding CZK 100 million or who have at least 100 employees. This is essentially a prudent organisation of relationships with creditors, with courts having the main say in the entire process of the “agreement”. In comparison, debt relief can only be used for debtors who are not undertakings.
In this case, a debtor has two possibilities for resolving his situation: either a one-off settlement of all debts consisting primarily in selling his assets or a five-year repayment schedule, during which the debtor hands over to creditors almost all his income above subsistence level. This method should help in particular honest debtors and low-income earners. It is therefore possible that after the debtor pays off 30% of the debt, the court can decide to waive the remaining debt. However, to use this way of resolving a debtor’s financial situation, the debtor has to fulfil very strict conditions, such as providing income and asset statements, spousal consent, etc.
The new regulations should lead to greater transparency and overall acceleration of insolvency proceedings.