Introduction of a Debt Management Procedure for Natural Persons in Hungary
Professor Emeritus, University Professor, Scientific Consultant, State Audit Office of Hungary, Member of the Monetary Counsil of MNB
Published in: Public Finance Quarterly 2015/4 (p. 492-509.)
SUMMARY: Excessive indebtedness makes support for rehabilitation necessary for millions of households. Hungary – mainly using the experiences of European countries – introduced the institution of personal bankruptcy this year. This paper attempts to compare the European model and the US practice, the former being characterised by a creditor-oriented approach, while the latter focusing on the debtor. On the basis of this, the paper discusses the objectives of the Hungarian personal bankruptcy law in an international context, including the importance of a “new beginning” for the debtor and the main features of the procedure in and out of court. It emphasises that in Hungary as well, the debtor must initiate a debt management procedure – an agreement to be reached through negotiations – first out of court and then in court. The debt remaining at the end of the procedure can be cleared after five years – similarly to European practice. Since the procedure under the new law can be initiated first by debtors who can no longer pay their housing mortgage loans, it is expected to have favourable social and macro-economic effects.
KEYWORDS: consumer insolvency, debt management, debt management in Europe and the US
JOURNAL OF ECONOMIC LITERATURE (JEL) KÓD: D18, D19, G33