An analysis of the incidence of personal bankruptcy in the Moravian-Silesian region in the Czech Republic

Abstract

In the last few years, the number of filed insolvency proposals has been constantly growing, which reflects the current economic situation. This article concerns the incidence of personal bankruptcies and their settlement (through debt relief) in the Czech Republic, especially in the Moravian-Silesian region, specifically in the Karvin region. This is a locality where the incidence of personal bankruptcy and its settlement through debt relief is among the highest in the Czech Republic. One of the reasons for this state is the composition of the population, which moved to this locality for work. A large part of the observed debtors had only attained primary education or are only trained. Their financial literacy is not of an adequate level, so they are cannot be aware of the risks stemming from borrowing money or anticipate the consequences arising from leaving their liabilities unfulfilled. The debtors borrowed money without prior consideration as to whether they would be able to return the borrowed money including interest. In this way, they got caught in a debt spiral insofar as they attempted to pay their present debts by closing further loan agreements under unfavourable conditions with financial institutions that are not under the supervision of the Czech National Bank. The Insolvency Act settles citizen over-indebtedness through debt relief. If the debtor fulfils conditions prescribed by the state, the debtor can after 5 years rid itself of its theretofore unpaid debts. From the undertaken survey it follows that men predominate among debtors in debt relief. The largest group is made up of men between 35 to 45 years of age. Among women, the most indebted age group is up to 35 years of age. Working pensioners, who have an assured regular, stable income which they cannot lose insofar as it is paid by the state, are the most reliable from the perspective of the relative extent to which creditor demands are satisfied.