Repayment Plan and Debt Discharge After Consumer Bankruptcy

When the repayment-plan stage begins

Once the deadline for filing claims has passed and the steps needed to liquidate the estate have been completed, the trustee submits a draft repayment plan to the court, together with a justification, or reports that the conditions exist for discharge without a plan, conditional discharge, or refusal of discharge. The bankrupt individual and creditors may present their positions. The court is not mechanically bound by the trustee's draft.

At this stage, the results of liquidation, the list of unsatisfied obligations, the causes of insolvency, and the debtor's current situation are all brought together. What matters is not only today's income, but earning capacity more broadly. Someone who deliberately restricts their work without justification cannot assume the court will base the plan solely on an artificially low actual salary.

A plan of up to 36 months — the basic model

Where it has not been established that the bankrupt individual caused their own insolvency, or significantly worsened it, intentionally or through gross negligence, the repayment plan generally cannot exceed thirty-six months. The court sets out which creditors participate in the plan, the amount of the monthly or other payments, and the portion of the obligations to be discharged once the plan is completed.

The maximum period does not mean everyone gets a plan of exactly three years. The law also provides for a shorter plan where a higher level of satisfaction is achieved: if, through the distribution plans and the repayment plan combined, the debtor repays at least seventy percent of the obligations covered, the period cannot exceed one year; at at least fifty percent, it cannot exceed two years. The base for this calculation must be worked out correctly, taking into account payments already made during the proceedings.

A 36–84 month plan for intent or gross negligence

If the court finds that the debtor caused their own insolvency, or significantly worsened it, intentionally or through gross negligence, the plan cannot be shorter than thirty-six months or longer than eighty-four months. This is a meaningful difference: discharge remains possible, but it requires a longer period of fulfilling one's duties.

Gross negligence is not every financial mistake. The assessment depends on the circumstances, the debtor's knowledge, the scale of the risk taken, and the response to mounting problems. A loss of income following illness may be judged differently from repeatedly taking out expensive loans with no realistic ability to repay them. Chronology, documentation, and an explanation of motives matter more than a general claim of "I had no choice."

How the court sets the instalment amounts

The court takes into account the bankrupt individual's earning capacity, the need to support themselves and any dependants, their housing needs, the amount of unsatisfied claims, and the degree to which they were already satisfied during the proceedings. Earning capacity is not the same as current income — age, health, education, experience, the labour market, and caregiving duties are all considered.

Costs should be realistic and documented. The budget covers housing, food, healthcare, transport, childcare, and other justified needs, but not every past expense will be treated as necessary. The court looks for a balance between the debtor's ability to function and creditors' right to satisfaction. A well-prepared budget neither inflates nor omits items, and points to supporting evidence.

Discharge without a plan for permanent inability to pay

If the bankrupt individual's personal situation clearly shows a permanent inability to make any payments under a plan, the court may discharge the obligations without setting one. This ground is exceptional and requires permanence. Serious illness, permanent disability, age, and the absence of any realistic income prospects can all be relevant, considered together.

The mere absence of a job on the day of the ruling, or a temporary illness, does not necessarily amount to permanent inability. The court may expect the situation to improve, or find that at least limited capacity exists. Medical records, official determinations, employment history, caregiving circumstances, and foreseeable benefits should show not just the current state, but the outlook.

Conditional discharge and the five-year observation period

Where the inability to pay is not permanent, the court may conditionally discharge the obligations without a plan for a period of five years. During that time, the debtor has reporting duties and cannot carry out legal transactions that could worsen their ability to perform any future plan, beyond ordinary management, without the court's consent.

If, within the five years, the situation improves enough to allow repayments, the court can set a plan. If no improvement occurs and the debtor has met their obligations, the discharge becomes final under the statutory rules. A conditional discharge is therefore not an immediate closure of the case — it requires discipline and a response to any summons.

Refusal of discharge

The court refuses to set a plan or grant discharge if the bankrupt individual intentionally caused their own insolvency, or significantly worsened it, in particular by squandering assets or intentionally failing to pay due obligations. The law also addresses the situation where, within the ten years before the petition, the debtor already had proceedings in which all or part of their obligations were discharged.

In both cases, the law leaves room for considerations of fairness or humanitarian grounds. This is not an automatic loophole — the circumstances must be specific and convincing. Deliberately concealing assets, false statements, or a serious failure to perform one's duties weigh further against the debtor. Honesty throughout the proceedings has real practical weight for the final outcome.

Duties while the plan is being carried out

The debtor makes the payments set out in the plan and files an annual report on its performance, on income achieved, amounts repaid, and any assets acquired above a certain value. Significant changes must be reported. Additional income, gifts, or an inheritance cannot be concealed.

If the plan temporarily cannot be performed for reasons beyond the debtor's control, the law allows an application for a change. Where the impossibility is permanent, further outcomes provided for by law become available. The worst approach is simply not paying and not staying in contact. Setting the plan aside can deprive the debtor of the discharge they were expecting, particularly where the breach is culpable.

Which obligations will not be discharged

The Bankruptcy Law excludes certain categories from discharge altogether. These include, among others: maintenance (alimony) obligations, damages arising from annuities for causing illness, incapacity for work, disability, or death, obligations to pay court-ordered fines, monetary penalties of a criminal nature, and the obligation to repair damage and pay compensation for harm resulting from a crime or an offence. Obligations intentionally not disclosed are also excluded from discharge, where the creditor took no part in the proceedings.

This list must be applied to the specific legal basis of each claim — the label a creditor gives a debt in a letter does not always determine its classification. Before filing, it is worth flagging potentially non-dischargeable obligations, since they affect the household budget after the proceedings end. A promise to "wipe out every debt" is simply inconsistent with how the law is built.

Conclusion: discharge requires completing the process

Once the plan has been properly carried out, the court confirms its performance and discharges the pre-bankruptcy obligations that remain unsatisfied, except for the non-dischargeable categories. That is the moment of legal discharge, within the scope of the court's decision — not the day bankruptcy was declared.

A realistic plan should leave the debtor able to support themselves, with a small margin for ordinary fluctuations, while still meeting the statutory criteria for creditor satisfaction. Preparing for this stage starts earlier — by documenting income and costs, actively seeking work matched to one's capacity, and cooperating honestly with the trustee.

Frequently asked questions