BE BORN AGAIN

I am fighting for debt relief in a consumer bankruptcy case.

“You gave me a second life”. It seemed to me that this kind of compliment could only be heard by a doctor from a patient, or another person who has saved someone from death. However, I once heard a compliment of this kind myself, even though I had not cured anyone or saved anyone in danger. For it was about “second life” in a different context. “Second” life, although being a continuation of the “first” life, however, free of a lifetime of struggling with financial obligations from years ago, enforced, yet unsettleable in full.

The client thanking me for his ‘second life’ had approached me a year earlier. He was a young man in his thirties, a happy spouse and a young father. He had a good job and even better prospects in it. Even so, he needed my help with regard to past events. Years ago, when he was in his twenties, he had, on several occasions, guaranteed his parents’ debts at their request. At the time, the client’s parents ran a chain of grocery shops, which were finding it increasingly difficult to cope with the competition from the supermarkets and discount grocery shops that were appearing at a rapid pace at the time. They assumed that with the funds raised they would pay off suppliers, “get on the straight and narrow” and finance the repayments from further ongoing operations. Nonetheless, with reiterating liquidity problems, their creditworthiness was limited. The lenders demanded further collateral, and the client’s parents asked the client not to distrust their parents, and for obvious reasons, the client did not want to refuse their requests for help. and they financed their ongoing operations. The client’s parents were eventually forced to close down the business, leaving themselves and – to their despair – the client, who was only just entering adulthood, with several hundred thousand dollars in liabilities. For more than ten years, the client struggled with this kind of ‘legacy’. 

He could not even think about paying off the liabilities on his own – the monthly interest accrual exceeded his income, even if the portion necessary for day-to-day living was ignored. It was also obvious that, with this kind of “credit history”, the client could not be too optimistic about taking out another loan, which he could use to pay off the previous ones with interest. Even if he did, it had to be assessed that he would have to pay significant instalments until later in his old age. Nor could one assume that, in his dealings with the lenders, he could count on the argument being taken into account that he had never personally benefited from the funds granted following the guarantees he had made: the funds received by his parents only served to prolong the “agony” of the shops they ran for a fairly short period. Moreover, the client’s father died shortly thereafter and his mother’s health deteriorated significantly. The situation seemed to have no way out, the ‘baggage’ weighing down on the Client significantly limiting his prospects of entering adulthood with a sense of stability and happiness.

I proposed to file an application on behalf of the Client to declare the so-called “consumer bankruptcy” This bankruptcy is a relatively young institution of Polish law. Before 2009, only entrepreneurs could declare bankruptcy. Apart from his/her insolvency, the applicant then had to prove that he/she fell into financial difficulties through no fault of his/her own, nor did he/she contribute to the increase of the debt. The circumstances enumerated above supported, in my opinion, this kind of thesis. I submitted requests for the client to be heard and for his mother to be interviewed in order to prove that such circumstances existed. I eagerly awaited the date of the hearing.

Unexpectedly, a few weeks later, I received a copy of the order dismissing the application in the morning mail. The court argued that the prerequisites for granting the application had not been demonstrated, namely the lack of fault in relation to falling into insolvency and the lack of fault in relation to the increase in the level of debt. The decision seemed thoroughly wrong. The court seemed to have overlooked that the application included requests to hear the client and to cross-examine a witness. The circumstances listed in the application that led to the debt (the Client’s relationship with his parents, the loss of financial support from them) could not be fully demonstrated in any other way – for example, through documents or accounts. At that time, interrogatories could not be ‘substituted’ in civil procedure with the submission of written statements by a party or potential witness with the force equivalent to sworn testimony. According to the wording of Article 245 of the Civil Procedure Code, such a statement would only constitute evidence that a certain person had made a statement of a certain content, not that the circumstances described had actually occurred. It was illogical that the court neither dismissed my application for interrogatories nor conducted the interrogatories which I requested. The allegation that I had failed to prove the relevant circumstances therefore appeared to be unfounded – only after the evidence indicated by a party has been taken can it be assessed whether or not a particular circumstance has been adequately proven by means of it. The reaction had to be to lodge an appeal. If the order dismissing the application had not been challenged and had become final, the client would not have been able, in view of res judicata, to make a new application based on the same circumstances. 

I therefore challenged the decision, pointing to the above irregularities in the court’s procedure. However, this step only postponed the threat posed by the validity of the ruling dismissing the application, without removing it entirely. Despite what I consider strong arguments against the court’s decision, I could not assume with 100% certainty that the appeal I filed would be upheld. Had this not been the case, the matter would also have ended – ultimately and unfavourably for the client, without the client being given the opportunity to prove his or her case at a hearing (not possible before the second instance court). Respectively, I decided to file a complaint only to then… withdraw the already (albeit non-finally) dismissed application. In such a case, pursuant to Article 332 § 2 of the Code of Civil Procedure, an unfavourable decision of the court of first instance does not become final, while the court of second instance – this time ‘one hundred percent’ – revokes it, due to the withdrawal of the motion. As a result, I returned with the Client to the ‘ground zero level’. We resubmitted the motion, and accordingly the client ‘regained’ the right to present his arguments to the court for a substantive assessment in full two-instance proceedings. In the retrial, the court – this time after hearing the client – granted the application and declared the client bankrupt. This was followed by the repayment of an insignificant part of the Client’s liabilities at the expense of that part of the Client’s non-personal assets. Subsequently, the court determined – taking into account the Client’s level of earnings and the funds necessary for his own and his family’s upkeep – the amount of 36 monthly instalments, which the Client timely paid to his creditors. Thereafter, finding that the obligations imposed on the Client had been fulfilled, the court irrevocably waived the remaining (predominant) part of his obligations.

This one, in turn, as he put it, was “given a new life”. He was starting “from scratch”, but without the several hundred thousand dollar debt from years before. He was finally able to turn his hand to the future, using his own energy and abilities exclusively for the benefit of himself and his loved ones. Although at one point – albeit undeservedly – defeat was unexpectedly close…