This is important not only for those considering bankruptcy, but also for creditors, family members, individuals who have lost their business, guarantors, former sole proprietors, and everyone whose financial situation has become difficult.
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1. The purely mechanical 25 MMA criterion will no longer apply
Until now, an individual’s insolvency was linked to overdue obligations exceeding 25 minimum monthly wages.
The new regulation moves towards a broader assessment: it will be important not only how much a person owes, but also whether they can realistically fulfill their obligations within a reasonable period.
This, according to R. Joskaudienė, means that the court will have to assess the entire financial picture more thoroughly: income, assets, debt structure, family situation, essential needs, the nature of obligations, and real repayment capabilities.
“In practice, this can be significant in cases where the debt is not formally very large, but the person’s situation is objectively hopeless, or conversely – when the debts are large, but the person still has real opportunities to fulfill them,” she explained.
2. The solvency restoration plan will be more flexible
Until now, the duration of the solvency restoration plan was usually linked to a 3-year period.
The amendments stipulate that the plan may last up to 3 years. This means more flexibility. Not in all cases will a person need the full maximum term if their situation allows for faster solvency restoration.
“However, it is important to understand: an individual’s bankruptcy is not an automatic ‘debt write-off’. It is a court-controlled process in which the individual must cooperate honestly, disclose assets, income, obligations, implement the plan, and refrain from actions that would violate the interests of creditors,” emphasized R. Joskaudienė.
3. Greater emphasis on the independence of the bankruptcy administrator
The amendments strengthen the requirements for the bankruptcy administrator. If an individual proposes an administrator candidate themselves, a consent-declaration from the administrator will need to be submitted.
“In it, the administrator will have to confirm that they agree to administer the process, that there are no circumstances preventing their appointment, that they meet the requirements for impeccable reputation, and that they are insured with professional civil liability insurance,” explained R. Joskaudienė.
This, according to her, is important for one essential reason: the bankruptcy administrator in the process must not be ‘the debtor’s person’ or ‘the creditors’ person’, but an independent participant in the process who ensures lawful, transparent, and objective administration of the bankruptcy process.
4. Creditor voting will become more modern and structured
One of the most significant changes is the alteration of the procedure for creditor meetings and voting.
It is foreseen that creditors will be divided into groups. Pledge holders and mortgage creditors will be assessed separately, and other creditors separately. This, according to R. Joskaudienė, is important because the interests of creditors in an individual’s bankruptcy process do not always coincide.
“For example, a mortgage creditor whose claim is secured by real estate usually has a different interest than a creditor whose claim is not secured. Therefore, decision-making in groups can help to more accurately reflect the situation of different creditors,” stated R. Joskaudienė.
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Electronic creditor voting using an information system is also foreseen. This, according to the lawyer, should speed up the process, reduce formalities, improve information accessibility, and make creditor participation more effective.
5. Not all debts are written off during bankruptcy
This is one of the most common mistakes in practice. People often think that all debts are written off after an individual’s bankruptcy. This is not the case.
“The law provides for exceptions. Typically, certain claims for damages caused by a criminal act, child support, some fines to the state, and other requirements explicitly stated in the law are not written off,” said R. Joskaudienė.
According to her, the latest practical rule is particularly important: when deciding on the write-off of remaining unsatisfied creditor claims, one must consider what legal regulation was in force at the time the bankruptcy case was initiated. This, according to her, can determine whether a specific claim will be written off or will remain valid even after the bankruptcy process ends.
6. When are the changes relevant?
Some of the changes are foreseen from January 1, 2027, and the part concerning electronic creditor voting and the new procedure for creditor meetings – from May 1, 2028.
“Therefore, it is particularly important to distinguish three situations at present:
firstly – already initiated cases, to which the regulation in force at the time of their initiation applies;
secondly – cases that will be initiated before the new amendments come into force;
thirdly – future cases, in which the new model of insolvency, administrator appointment, plan, and creditor voting will already apply,” said R. Joskaudienė.
Practical conclusion
“An individual’s bankruptcy is becoming less formal and more focused on the person’s real financial situation. This is a positive step, but at the same time, it requires greater preparation,” said R. Joskaudienė.
Before applying to court for individual bankruptcy, according to her, it is essential to responsibly assess:
- whether the person is truly insolvent;
- which debts could be written off and which would remain;
- whether the person acted honestly;
- what assets and income will need to be declared;
- whether the solvency restoration plan will be realistically implemented;
- what risks arise for creditors and the debtor themselves.
“An individual’s bankruptcy is not a shameful process. It is an opportunity provided by law for an honest person to start their financial life anew. However, this opportunity only works when the process is initiated responsibly, transparently, and legally accurately,” emphasized R. Joskaudienė.
Legal basis: Law on the Bankruptcy of Natural Persons of the Republic of Lithuania, the latest amendments to the Law on Bankruptcy of Natural Persons related to Articles 2, 4, 6, 7, 8, 9, 11, 12, 14 and 25, as well as relevant practice of the Supreme Court of Lithuania regarding the write-off of remaining unsatisfied creditor claims.
“Every situation in an individual’s bankruptcy process is individual. The size of the debt alone does not answer the question of whether bankruptcy is the most appropriate path. Sometimes a more effective solution can be negotiations with creditors, a settlement agreement, refinancing, or another legal restructuring method,” she added.
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