Debt Restructuring And Debt Protection Act


Published: 2011-04-05

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Debt Restructuring and Debt Protection Act

Passed 17.11.2010

Chapter 1 General Provisions 

§ 1.  Purpose of Act

(1) The purpose of this Act is to facilitate the restructuring of the debts of a natural person having solvency problems (debtor), in order to overcome the solvency problems and avoid bankruptcy proceedings. Thereby the legitimate interests of the debtor as well as of their creditors shall be taken into account.
(2) A debtor is deemed to have solvency problems if they are unable or likely to be unable to perform their obligations at the time when they fall due.

§ 2.  Essence of debt restructuring

(1) In debt restructuring proceedings the restructuring of the financial obligations of a debtor is made possible by way of extension of the term of performance of an obligation, by way of performing the obligation in instalments or by way of reducing the obligation.
(2) Only the extension of the term of performance and the performance in instalments is allowed in debt restructuring proceedings in the event of the following claims:
1) maintenance support claims;
2) claims for compensations of damage caused by a wilful unlawful act.
(3) The obligations of a debtor which have fallen due by the time of submission of a debt restructuring application can be restructured in debt restructuring proceedings. In addition, obligations arising from a continuing contract, which are created or fall due after the submission of a debt restructuring application, can be restructured on the terms and conditions provided for in § 3 of this Act.

§ 3.  Restructuring obligations arising from continuing contract

(1) A restructuring plan may stipulate that a credit contract or another continuing contract, which has been made by a debtor before the submission of a debt restructuring application and imposes on the debtor financial obligations which will fall due after the submission of the debt restructuring application, shall terminate upon approval of the restructuring plan. The termination of the contract has the same consequences as the extraordinary cancellation of the contract due to a circumstance arising from the debtor. The debtor’s obligations arising from the termination of the contract can be restructured beforehand under the restructuring plan.
(2) A restructuring plan may stipulate that the debtor’s financial obligations under the credit contract, which will fall due not later than within one year after the approval of the restructuring plan, shall be restructured instead of terminating the credit contract specified in subsection (1) of this section. These obligations can be restructured only by extending the term of performance of the obligations or by allowing the debtor to perform the obligations in instalments.
(3) If obligations arising from a leasing contract are to be restructured in the manner provided for in subsection (2) of this section, the lessor who is a creditor may extraordinarily cancel the contract within one week after the approval of the restructuring plan. To that end the restructuring plan may also provide for the restructuring of claims arising from the extraordinary cancellation of the contract, including the reduction of obligations.

§ 4.  Scope of application of Act

(1) A debtor is subject to debt restructuring proceedings regardless of being an undertaking.
(2) Debt restructuring may be applied for by a debtor whose place of residence is in Estonia and who has resided in Estonia for a period of no less than two years before submitting the debt restructuring application.

§ 5.  Application of Code of Civil Procedure

The provisions of the Code of Civil Procedure regarding proceedings on petition apply to debt restructuring proceedings, unless otherwise provided for in this Act.

§ 6.  Competence of assistant judge

(1) Instead of a judge, an assistant judge may also perform the functions of the court in debt restructuring proceedings.
(2) A judge decides the exact division of their own work and that of an assistant judge in a debt restructuring case and may give instructions to the assistant judge.
(3) Only a judge may decide on the admissibility of a debt restructuring plan, the appointment of an advisor and the approval, revision or annulment of a restructuring plan.
(4) Subsections 595 (2)-(4) of the Code of Civil Procedure apply to the competence and removal of assistant judges.

§ 7.  Entry into force of and appealing against rulings

(1) A ruling by which a debt restructuring application is declared admissible by a court as well as a ruling by which a debt restructuring plan is approved shall be valid and subject to enforcement as of its submission to the debtor. A ruling by which a debt restructuring plan is not approved and an application is refused as well as a ruling by which an application is dismissed or by which a debt restructuring plan is revised or annulled, shall be valid and subject to enforcement as of its entry into force.
(2) An appeal against a ruling made in debt restructuring proceedings can be filed only if the filing of an appeal against the ruling is permitted by law. If an appeal can be filed against a ruling of a county court, an appeal against a ruling made by a circuit court regarding the appeal against the ruling of the county court can be filed also with the Supreme Court, unless otherwise provided by law.
(3) A ruling made by a circuit court on the basis of an appeal filed against a ruling of a county court shall be valid and subject to enforcement as of its entry into force in accordance with subsection 466 (3) of the Code of Civil Procedure, unless the circuit court decides that its ruling is subject to immediate enforcement.

§ 8.  Procedural expenses

(1) The debtor shall bear the expenses of the debt restructuring proceedings. The procedural expenses of creditors shall be borne by the creditors.
(2) The court may have the debtor bear the procedural expenses of the creditors if the debtor knowingly submitted an unfounded debt restructuring application or caused procedural expenses to the creditors by otherwise knowingly submitting false information or knowingly submitting an unfounded application or objection.
(3) The debtor shall not receive any state legal aid for paying the state fee. In the event of implementation of the debt restructuring plan the debtor does not have to compensate for the expenses of the procedural aid granted by the state.

Chapter 2 Submission of Application and Application Proceedings 

§ 9.  Jurisdiction

A debtor shall submit a debt restructuring application to the county court of the location of the debtor's place of residence or seat.

§ 10.  Debt restructuring application

(1) Before submitting a debt restructuring application to a court, a debtor shall take steps to achieve the extrajudicial restructuring of the debt.
(2) At least the following information shall be submitted in a debt restructuring application:
1) the debtor’s explanation of the solvency problems and the reasons thereof;
2) whether and what the debtor has done to prevent or eliminate the solvency problems;
3) the debt restructuring measures requested by the debtor;
4) the debtor’s explanation that the debtor is able to perform their obligations and that their insolvency can likely be prevented in the event of taking debt restructuring measures;
5) the debtor’s confirmation that the debtor is unaware of any circumstances that might preclude the restructuring of the debt and that the debtor will perform the obligations provided for in § 21 of this Act;
6) the debtor’s opinion on the need for the appointment of an advisor;
7) information allowing for verifying payment of the state fee.
(3) A sole proprietor applying for the reorganisation of an enterprise shall also explain that the enterprise needs reorganisation and that the sustainable management of the enterprise following the reorganisation is likely, as well as indicate the consequences of reorganisation for the employees of the enterprise.
(4) Spouses may submit a joint application for restructuring debts. If the application is submitted by one spouse, the spouse shall indicate the details of the other spouse in the application and if the other spouse also has solvency problems, and explain why the application is not submitted jointly. This also applies in an event where the marriage has been divorced, but the joint property has not been divided.

§ 11.  Debt restructuring plan

(1) A debt restructuring application shall be accompanied by a debt restructuring plan (hereinafter restructuring plan) indicating the following:
1) the obligations to be restructured and the manner of restructuring;
2) the term of implementation of the restructuring plan.
(2) If a debtor applies only for restructuring some debts or for restructuring various debts to a different extent, the debtor shall have to explain the different treatment of the creditors in the application.
(3) No debt restructuring plan needs to be annexed to a debt restructuring application if the debtor applies for drawing up the plan with the help of an advisor.

§ 12.  Other annexes to debt restructuring application

(1) The following shall be annexed to a debt restructuring application:
1) a list of the assets, property and any and all income of the debtor and the family members belonging to the same household (hereinafter list of assets) at the time of submission of the application, indicating the value of each asset item and their share in joint ownership and common ownership or in collective rights;
2) a list of the financial obligations of the debtor (hereinafter list of debts) at the time of submission of the application, indicating the names and contact details of all the creditors, the presumable amounts of the principal and collateral claims, the collateral as well as separately point out any running expenses (housing expenses, maintenance obligations, etc.) and any joint and several obligations;
3) copies of the debtor’s tax returns and bank account statements of the last three years and copies of the documents (loan agreements, etc.) serving as the basis for any major obligations.
(2) An undertaking shall also annex to the application the account statements of the last year and an overview of their financial position, economic results and cash flows. If the undertaking uses the cash-based accounting method, the last year’s tax return shall serve as the basis for the submission of the aforementioned information.
(3) If a debtor has transferred an immovable, a registered movable or a right or gifted or lent money to third parties in an amount exceeding 3,000 euros within five years before the submission of the application, it shall be indicated in the list of assets. Transactions matching these criteria, which have been concluded with persons connected with the debtor for the purposes of § 117 of the Bankruptcy Act, shall be indicated separately.
(4) In a list of debts submitted separately by one spouse, the obligations for which the other spouse is or may be liable as well as the obligations of the other spouse for which the debtor may be liable shall also be indicated.
(5) If a debtor does not admit any claims to any extent, the debtor shall indicate it in a list of debts as well as point out any debts which are subject to judicial or other proceedings. A debtor shall indicate in a list of assets whether any judicial or other proceedings, including enforcement proceedings, are in progress with regard to any assets or property and what assets are or what property is subject to any such proceedings.
(6) For the purpose of indicating obligations in a list of debts, a debtor may demand that a creditor give an overview of the accounts of the debtor's debt.

§ 13.  Form relating to submission of application

(1) By a regulation, the Minister of Justice shall establish the forms of the debt restructuring application, list of assets, list of debts and restructuring plan, and debtors shall be obligated to use these forms. Sole proprietors seeking the reorganisation of their enterprise shall not be obligated to use the form of the debt restructuring plan.
(2) The forms specified in subsection (1) of this section shall be freely and free of charge available to everyone on the website of the Ministry of Justice and in any court.

§ 14.  Order of adjudication of debt restructuring applications and bankruptcy petitions

(1) If a petition to declare the bankruptcy of a debtor has been filed with a court in addition to a debt restructuring application, these shall be joined into the same proceedings and be reviewed by the court with whom the petition or application was filed first.
(2) In the event specified in subsection (1) of this section a debt restructuring application shall be adjudicated first even if it was submitted after a bankruptcy petition. The court shall postpone the declaration of bankruptcy until the approval of a restructuring plan has been decided or until the debt restructuring proceedings have been completed. In such an event the adjudication of the bankruptcy petition shall be suspended also if an interim trustee has been appointed.
(3) In the event specified in subsection (2) of this section the court may take measures securing the bankruptcy proceedings if these do not impede the debt restructuring proceedings.

§ 15.  Adjudication of admissibility of application

(1) If necessary, the court shall hear the opinion of the debtor or their creditors or request additional information or documents from them before declaring a debt restructuring application admissible. The court may also request information about the financial position or solvency of the debtor or family members belonging to the debtor’s household from other persons and institutions, including credit institutions.
(2) The court may also order that the debtor state under oath that the information given to the court about the assets, property, debts and economic or professional activities is true to the knowledge of the debtor. To that end the debtor shall orally take the following oath:
“I, (name), hereby swear on my honour and conscience that the information given to the court about the assets, property, debts and activities is true to my knowledge.” The debtor shall sign the text of the oath.
(3) The court shall adjudicate the admissibility of an application within seven days after receiving a valid application and taking the steps specified in subsections (1) and (2) of this section.
(4) Already before the adjudication or submission of the application, the court may grant provisional legal protection, among other things, suspend enforcement proceedings or compulsory enforcement aimed at the assets and property of the debtor.

§ 16.  Admissibility of application

(1) A court shall declare a debt restructuring application admissible if the application complies with the requirements established in the Code of Civil Procedure and this Act.
(2) A ruling declaring an application admissible shall be submitted to the debtor and to all creditors the restructuring of whose claims is sought by the debtor. The ruling shall also be published in the official publication Ametlikud Teadaanded.

§ 17.  Inadmissibility of application

(1) A court shall declare a debt restructuring application inadmissible if:
1) the debtor has been declared bankrupt;
2) in the last ten years before the submission of the application the court has granted the debtor’s debt restructuring application or application for a release from debts in bankruptcy proceedings;
3) the debtor does not have solvency problems or these can clearly be overcome without restructuring debts, among other things, by selling the debtor’s assets and property to an extent that can be reasonably expected from the debtor;
4) the application or annexes thereto do not comply with law and, among other things, the state fee has not been paid.
(2) A court may declare a debt restructuring application inadmissible if:
1) the approval or implementation of the debt restructuring plan offered by the debtor is unlikely, considering, among other things, the debtor’s solvency over a period of three years preceding the submission of the debt restructuring application and the debtor's ability to engage in a reasonably profitable activity during the term of validity of the debt restructuring plan, considering the debtor's age, profession and education;
2) the debtor has failed to perform the obligation provided for in subsection 10 (1) of this Act;
3) the debtor has, wilfully or due to gross negligence, submitted materially incorrect or incomplete information about their assets, property, income, creditors or liabilities;
4) the debtor refuses to take an oath regarding the truthfulness of the submitted information or to submit additional information requested by the court;
5) the debtor has been convicted of committing a crime relating to bankruptcy proceedings or enforcement proceedings, a tax crime or a crime specified in §§ 380-3811 of the Penal Code and the penal data has not been deleted from the penal register;
6) in the last three years preceding the submission of the application or after the submission of the application the debtor has, wilfully or due to gross negligence, submitted incorrect or incomplete information about their financial position for the purpose of obtaining aid or other benefits from the state, local authority or foundation or for the purpose of evading taxes;
7) the debtor has obviously wilfully concluded transactions harming the creditors.
(3) If an undertaking applies for the reorganisation of an enterprise, the court may declare the application inadmissible if the undertaking has not explained that the enterprise needs reorganisation and the sustainable management of the enterprise after the reorganisation is probably possible.
(4) A debtor may file an appeal against a ruling by which a court declared the debtor’s debt restructuring application inadmissible.

§ 18.  Appointment of advisor

(1) A court may, on the basis of a debtor’s application or of its own volition, appoint an advisor for ensuring the compliance of the application proceedings with the requirements if it is necessary for identifying the debtor's financial situation or if it clearly simplifies or expedites the application proceedings or ensures better protection of the interests of the debtor or the creditors. The court may appoint an advisor also after declaring a debt restructuring application admissible.
(2) A person having sufficient knowledge and experience may be appointed as an advisor. A court employee, the debtor or a creditor or a person dependent on them or the person specified in subsection 15 (7) of the Reorganisation Act shall not be appointed as an advisor. Usually, a bankruptcy trustee is not appointed as an advisor.
(3) Before appointing an advisor, the court shall hear the debtor’s opinion. No advisor shall be appointed without the debtor’s consent.
(4) Upon appointment of a person as an advisor, the person’s consent is required.
(5) In the event of appointment of an advisor the court shall determine the amount which the debtor must pay to the court’s deposit account for covering the advisor's fee and expenses and set a term for payment of the amount.

§ 19.  Functions of advisor

(1) The advisor’s function is to impartially and professionally inform the court and the creditors of the debtor’s financial situation and of the possibilities of overcoming the solvency problems, and to advise and assist the debtor in the course of the debt restructuring proceedings and to verify the lawfulness of the creditors’ claims and the lawfulness and reasonableness of the debtor’s transactions.
(2) Among other things, the advisor shall:
1) assist the debtor in drawing up the debt restructuring plan and in negotiations with the creditors;
2) inform the court about the performance of the advisor’s functions;
3) assess whether the claims to be restructured are certified and lawful, inform the court of any non-existent claims, claims whose amount is unclear and claims whose lawfulness or certification cannot be assessed;
4) if necessary, request from the debtor and the creditors evidence of the claims to be restructured;
5) perform other functions arising from law or assigned by the court, which are necessary for carrying out the debt restructuring proceedings.
(3) The advisor shall perform their functions with the diligence characteristic of a responsible and honest advisor and take into account the interests of all the parties to the proceedings. The court shall exercise supervision over the advisor.
(4) The advisor shall maintain the confidentiality of business secrets, personal data and other confidential information disclosed to the advisor in connection with the advisor’s functions.
(5) The procedure for calculation of the advisor’s fee and expenses to be compensated and the percentage limits of the fee shall be established by a regulation of the Minister of Justice.
(6) The provisions of §§ 17-19 of the Reorganisation Act regarding the reorganisation advisor apply to the debt restructuring advisor. The provisions regulating the advisor in the Code of Civil Procedure do not apply to the debt restructuring advisor.

§ 20.  Consequences of declaring admissibility of application

(1) If a debt restructuring application is declared admissible, the calculation of the default interest or a contractual penalty increasing over time on a claim aimed against the debtor shall be suspended until the approval of the restructuring plan or termination of proceedings. This does not apply to claims whose restructuring is not requested by the debtor.
(2) If an application has been declared admissible, the creditor cannot, relying on a breach of a financial obligation which occurred before the submission of the debt restructuring application, terminate a contract made with the debtor, which gives rise to the claims whose restructuring is requested by the debtor, or refuse to perform its obligations on such ground. An agreement which authorises the creditor to terminate the contract in the event of submission of a debt restructuring application or a debt restructuring plan is null and void.
(3) In the event of declaring an application admissible, the court shall suspend the (compulsory) enforcement proceedings carried out with regard to the debtor's assets and property until the approval of the debt restructuring plan or termination of the proceedings. For the given period the court may:
1) suspend the judicial proceedings involving a financial claim against the debtor regarding which no judgment has yet been made;
2) cancel measures securing an action, including the seizure of a bank account;
3) prohibit creditors to exercise rights arising from collateral given by the debtor, including to sell or apply for the sale of the object of pledge;
4) take other provisional legal protection measures.
(4) Considering the legitimate interests of a creditor, the court may, on the basis of the creditor’s application, permit the continuance of suspended enforcement proceedings and the exercise of the rights arising from the collateral given by the debtor also before the approval of the restructuring plan or termination of the proceedings.
(5) Declaring an application admissible does not preclude filing an action for the recovery of assets and property by the creditors and adjudication of the action in enforcement proceedings. An enforcement officer shall issue the gains to the creditors covered by a restructuring plan only at the request of the court and on the basis of the restructuring plan.

Chapter 3 Approval of Restructuring Plan 

§ 21.  Duties of debtor

(1) Information required in connection with the debt restructuring proceedings shall be given by the debtor to the court and to the advisor and, if ordered by the court, also to the creditors.
(2) The debtor shall assist the advisor in the performance of the advisor’s functions. If the court or the advisor considers it necessary to audit the debtor’s assets and property for the purpose of identifying the debtor’s financial situation, the debtor shall present their assets and property or grant access thereto.
(3) If the debtor does not perform the duties provided for in subsections (1) and (2) of this section, the court may dismiss the debt restructuring application.

§ 22.  Informing creditors

(1) After declaring a debt restructuring application admissible, the court shall send the application along with the restructuring plan and other annexes immediately to the creditors specified in the restructuring plan, the restructuring of whose claims is requested. The court may allow the debtor to change the restructuring plan before submission to the creditors or order the debtor to submit a new restructuring plan.
(2) Upon delivery of the restructuring plan to the creditor, the court shall grant the creditor a term of at least two, but no more than four weeks after the delivery of the restructuring plan in order to express an opinion to the court. The creditor shall express an opinion on whether the creditor consents to the debtor’s information regarding the claim and the security thereof, the debtor’s calculation and the restructuring of the debt in the manner requested by the debtor. If the creditor does not consent to restructuring the debt in the manner requested by the debtor, the creditor shall indicate whether the creditor would consent to restructuring the debt in another manner. The court shall also refer to the consequences of failing to express an opinion.
(3) If the court has appointed an advisor, the court shall communicate the advisor’s name and contact details to the creditors and also inform the creditors of whether they have to submit their opinion to the advisor instead of the court.
(4) The court may also set the debtor or the advisor a term for holding negotiations with the creditors over the amount or restructuring of the debt and therefore extend the term provided for in subsection (2) of this section, but not more than three months as of the receipt of the restructuring plan.
(5) In the event of appointment of an advisor, the court may order that the advisor or the debtor supervised by the advisor deliver the documents specified in subsection (1) of this section. Documents certifying delivery shall be submitted to the court.

§ 23.  Identification of amount of claim

(1) If the creditor whose claim is to be restructured does not consent to the information given by the debtor in the list of debts, the creditor shall inform the court or, if so determined by the court, the advisor about the extent in which the creditor does not consent to the claim and submit evidence certifying the circumstances. If the creditor fails to make a statement by the prescribed date, it shall be deemed that the creditor has consented to the amount of the claim.
(2) The court shall immediately forward the creditor’s position regarding the amount of the claim and the restructuring of the claim to the debtor or to the advisor, unless the court ordered the creditor to submit its position to the advisor.
(3) If the debtor or the advisor does not consent to an allegation contained in the creditor’s statement specified in subsection (1) of this section, the debtor shall immediately forward the statement along with evidence to the court and explain why the debtor does not consent to the contents of the statement.
(4) On the basis of the submitted allegations and evidence the court shall decide the amount of the creditor's principal and collateral claims and the existence of collateral not later than within one month after receiving the creditor's statement. If necessary, the court shall first hear the debtor, the creditor concerned and the advisor.
(5) The court may refuse to identify the amount of the creditor’s claim or identify it only partially if, in the opinion of the court, the claim that is to be restructured does not exist, its amount is unclear or the lawfulness or certification of the claim cannot be reasonably assessed and thus the claim or the scope thereof shall be identified outside the debt restructuring proceedings.
(6) A ruling which identifies the amount of the creditor’s principal and collateral claims or refuses to do so shall be sent to the debtor, creditor and advisor.
(7) The debtor may file an appeal against a ruling by which the amount of the creditor’s principal and collateral claims are identified or by which the court refuses to identify it. No appeal can be filed with the Supreme Court against a ruling made by a circuit court regarding the ruling of a county court.

§ 24.  Approval of restructuring plan

(1) The court shall approve the restructuring plan submitted by the debtor if no creditor or the debtor has challenged it within the prescribed term.
(2) The court may also approve the restructuring plan if at least half of the creditors of the claims not secured by a pledge approved the debt restructuring, the claims of such creditors represent at least a half of the claims not secured by a pledge and under the restructuring plan the creditor who submitted an objection to the restructuring plan is not treated substantially worse than other creditors, unless there is good reason for giving preference to some creditor.
(3) The court may also approve a restructuring plan which was not approved by the creditors or which the creditors approved to a smaller extent than provided for in subsection (2) of this section, if the court finds that:
1) the restructuring of the debt is justified, taking into account the legitimate interests and rights of the parties;
2) under the restructuring plan any creditor is not treated substantially worse than others, unless there is good reason for giving preference to some creditor.
(4) Upon weighing the interests and rights specified in clause 1) of subsection (3) of this section, the court shall, among other things, consider the scope in which the claim of the creditor who submitted an objection could be settled in bankruptcy proceedings in comparison with the amount to be paid to the creditor on the basis of the restructuring plan. Comparative data regarding bankruptcy proceedings shall be compiled based on the assumption that the bankruptcy proceedings will be carried out as of the commencement of the debt restructuring proceedings. Upon comparison, the possibilities of releasing the debtor who is a natural person from debt shall be taken in account on the basis of the debtor’s income during the restructuring proceedings. The provisions of this subsection shall be indicated in the statement of reasons of a ruling made on the approval of the restructuring plan.
(5) Upon approval of the restructuring plan on the basis provided for in subsection (3) of this section, the court shall not be bound by the requests of the debtor and the creditors, but may, among other things, approve the restructuring of only some debts and change the manner and scope of restructuring. Thereby the court shall, among other things, take into account to which extent the debtor should reasonably sell their assets and property for the purpose of settling their debts as well as the possibilities of recovery or other collection of the debtor's assets and property. The court shall not make the scope or the manner of debt restructuring less favourable for the creditor than requested by the debtor.
(6) A claim secured by a pledge may be restructured only if the creditor consents to it, even if the pledgor is a third party. This does not preclude or restrict the restructuring, pursuant to the general procedure, of the claim remaining after selling the pledge. The pledgee’s consent is not required for termination of a credit contract in accordance with subsection 3 (1) of this Act.
(7) The reduction of a creditor's interest and default interest claims to the level provided by law is not considered unequal treatment of the creditor.
(8) Before the approval of the restructuring plan, the court may hear the debtor and the creditors and appoint one expert or multiple experts to assess whether the restructuring of the debts is founded. No expert shall be appointed without the debtor’s consent.
(9) Upon approval of the restructuring plan on the basis of subsection (3) of this section, the court shall hear the debtor and the creditor. If, upon approval of the restructuring plan on the basis of subsection (3) of this section, the total amount of claims against the debtor exceeds 200 000 euros, the court shall, regardless of the debtor’s consent, appoint one expert or multiple experts to assess the reasons of the restructuring plan.
(10) Along with the approval of the restructuring plan, the court may establish with the debtor conditions for the implementation of the plan, among other things, regarding reporting, and order that the debtor coordinate certain transactions with the court or the advisor.

§ 25.  Refusal to approve restructuring plan, revision of restructuring plan and submission of new restructuring plan

(1) Regardless of subsections 24 (1)-(3) of this Act, the court may refuse to approve the restructuring plan if:
1) the debtor does not have solvency problems or these can clearly be overcome without restructuring debts, among other things, by selling the debtor’s assets and property to an extent that can be reasonably expected from the debtor or by recovery or other collection of the debtor’s assets or property;
2) the implementation of the restructuring plan is unlikely, considering the debtor’s assets, property and income;
3) the debtor has, wilfully or due to gross negligence, submitted materially incorrect or incomplete information about their assets, property, income, creditors or liabilities;
4) in the event of an application for the reorganisation of an enterprise, the sustainable management of the enterprise is probably not possible after the reorganisation.
(2) Before making a decision on the approval of the reorganisation plan or in the event of refusal to approve the reorganisation plan, the court may set an additional term for the debtor for the revision of the reorganisation plan or for the submission of a new reorganisation plan on the basis of the opinions submitted by the creditors or for another good reason, among other things, if it may be necessary for reaching an agreement with the creditors. The revised restructuring plan shall be sent to the primarily concerned creditors for the purpose of expressing an opinion pursuant to the procedure provided for in § 22 of this Act.

§ 26.  Ruling on approval of restructuring plan

(1) A ruling approving or refusing to approve a restructuring plan shall be delivered to the debtor, all creditors whose rights are affected under the restructuring plan and the advisor. A ruling approving a restructuring plan shall also be made public and shall be published in the official publication Ametlikud Teadaanded.
(2) The debtor may file an appeal against a ruling approving or refusing to approve a restructuring plan. The debtor may file an appeal against a ruling approving the restructuring plan if the debtor has submitted an objection against the plan beforehand.

§ 27.  Approval of reorganisation plan pursuant to principles of reorganisation proceedings

If a debtor applies for the reorganisation of an enterprise by way of restructuring and an advisor has been appointed, the court may, with good reason, provide for the approval of the restructuring plan pursuant to the procedure laid down in §§ 20-37 of the Reorganisation Act instead of the provisions of this Chapter.

§ 28.  Dismissal of application

(1) The court may dismiss a debt restructuring application after declaring it admissible, but before approving it.
(2) The court shall dismiss an application, above all, if the debtor requests it or if it becomes evident that the debtor is permanently insolvent.
(3) The court may dismiss an application if any ground due to which the application should not have been declared admissible (§ 17 of this Act) becomes evident as well as if it becomes evident that the debtor has hidden or squandered their assets or property, concludes a transaction harming the interests of the creditors or violates the debtor’s duty to assist or if the debtor fails to pay the amount determined by the court to be paid into the court’s deposit for the purpose of covering the fees and expenses of the advisor or expert.
(4) Before dismissing an application the court shall hear the debtor and may also hear the creditors concerned and the advisor.
(5) The court shall make public a ruling dismissing an application, publish a notice on the ruling in the official publication Ametlikud Väljaanded and, after the ruling has entered into force, inform thereof the enforcement officer conducting the suspended enforcement proceedings and the court conducting the suspended judicial proceedings. The court may have the advisor perform the duty to inform.
(6) The debtor may file an appeal against a ruling dismissing an application.

Chapter 4 Consequences of Restructuring Plan 

§ 29.  Overall consequences of approval of restructuring plan

(1) As of the approval of the restructuring plan, the legal consequences specified in it shall become effective with regard to the debtor and the person whose rights are affected by the restructuring plan.
(2) The approval of the restructuring plan shall not release a person who is jointly and severally liable for the performance of the debtor’s obligations from the performance of the person’s obligations. If the person who is jointly and severally liable for the performance of an obligation of the debtor has performed the obligation, the person shall have the right of recourse against the debtor only to the extent in which the debtor is liable for the performance of the obligation under the restructuring plan.
(3) The approval of the restructuring plan does not limit the right of the creditor who did not approve the restructuring of their claim to satisfy the claim only at the expense of collateral which is a pledge or other physical collateral.
(4) A restructuring plan approved by a court is an enforcement title with regard to the claim restructured by it. If a restructuring plan specifies the extension of the term of performance of an obligation, the claim cannot be enforced within the term specified in the restructuring plan.
(5) Subsection (4) of this section shall also apply to a person who, under a restructuring plan, assumes the obligation to secure the debtor's obligation towards a creditor.
(6) The approval of a restructuring plan does not preclude filing an action for the recovery of assets and property by the creditors and adjudication of the action in enforcement proceedings. An enforcement officer shall issue the gains to the creditors covered by a restructuring plan only at the request of the court and on the basis of the restructuring plan.

§ 30.  Preclusion of validity of restructuring plan

A restructuring plan shall not apply to a creditor for whom the restructuring plan has not been delivered for examination and expression of an opinion or who is otherwise unaware of the occurrence of the restructuring proceedings.

§ 31.  Action and enforcement proceedings during term of validity of restructuring plan

(1) During the term of validity of a restructuring plan no statement of claim or petition can be filed on the basis of a claim regulated by the restructuring plan.
(2) Upon approval of a restructuring plan, the enforcement proceedings and judicial proceedings regarding a claim not regulated by the restructuring plan, which proceedings were suspended upon declaring the restructuring application admissible, shall be continued.
(3) The approval of a restructuring plan shall not limit the creditor’s right to challenge claims not recognised in the restructuring plan in judicial proceedings. Also, in judicial proceedings the creditor may challenge the amount of the claim insofar as a portion thereof has not been recognised.

§ 32.  Default interest and contractual penalty during term of validity of restructuring plan

Following the approval of a restructuring plan, default interest and a contractual penalty shall be calculated on a claim that will not be restructured under the restructuring plan and the default interest and the contractual penalty shall be calculated on the basis of the initial legal relationship as of declaring the debt restructuring application admissible.

§ 33.  Bankruptcy petition during term of validity of restructuring plan

(1) During the term of validity of a restructuring plan no bankruptcy petition can be filed on the basis of a claim that is regulated by the restructuring plan.
(2) During the term of validity of a restructuring plan a bankruptcy petition shall be heard in the framework of the same proceedings by the judge who conducts the restructuring proceedings.
(3) The advisor who exercises supervision over the implementation of the restructuring plan shall be involved by the court in hearing the bankruptcy petition.
(4) An interim trustee shall not impede the implementation of a restructuring plan and shall fully cooperate with the court and the advisor exercising supervision.
(5) If the court finds that, taking into account the contents of a restructuring plan, there is a ground for declaring the debtor bankrupt, the court shall annul the restructuring plan and terminate the restructuring proceedings.
(6) The debtor and the creditor who filed a bankruptcy petition may file an appeal against a ruling by which the court adjudicates the bankruptcy petition.

§ 34.  Supervision over implementation of restructuring plan

(1) Court shall exercise supervision over the implementation of restructuring plans.
(2) The debtor shall give the court information for exercising supervision and assist the court in the performance of the duty to supervise.
(3) Every time a year has passed from the approval of the restructuring plan, the debtor or the advisor shall submit to the court and the creditors a report on the debtor’s financial situation and implementation of the restructuring plan, unless otherwise decided by the court. The court may request at any time that the debtor or the advisor submit a report on the implementation of the restructuring plan and have the advisor or an expert examine it at the expense of the debtor.

§ 35.  Revision of restructuring plan

(1) The debtor, advisor or creditor may, in the event of a change of circumstances, notably in the event of a significant change in the financial situation of the debtor or in the event the debtor’s actual financial situation becomes evident, submit to the court a request to revise the restructuring plan or the term of implementation thereof. The restructuring plan may also be revised on the basis of a judicial decision made with regard to the validity or amount of a claim.
(2) A restructuring plan may be extended to claims that fell due after the submission of a debt restructuring application or after the approval of the restructuring plan, provided that these are based on a transaction made before the time or on another legal ground. Among other things, the restructuring plan may be extended to claims remaining following the sale of the object of pledge.
(3) Sections 22-27 of this Act apply to the revision and approval of restructuring plans. This process involves creditors whose rights are to be limited by the revision of the restructuring plan.

Chapter 5 Termination of Proceedings 

§ 36.  Grounds of termination of debt restructuring proceedings

(1) Debt restructuring proceedings shall terminate in the event of rejection or dismissal of a debt restructuring application, annulment of a debt restructuring plan, termination of proceedings or expiry of the term of implementation specified in a debt restructuring plan.
(2) In the event of dismissal or rejection of an application or termination of proceedings, any and all consequences of declaring the application admissible shall lapse retroactively.

§ 37.  Consequences of expiry of term of implementation of restructuring plan

After the expiry of the term of a restructuring plan, a creditor can enforce a claim restructured under the restructuring plan only to the extent which has been agreed in, but not implemented under the restructuring plan.

§ 38.  Early implementation of restructuring plan

In the event of early implementation of the restructuring plan the proceedings shall terminate if the debtor has performed all the obligations assumed under the restructuring plan before the expiry of the term of implementation of the restructuring plan.

§ 39.  Annulment of restructuring plan

(1) The court shall annul a restructuring plan on the basis of an application of the debtor as well as in the event the debtor is declared bankrupt.
(2) The court may cancel the restructuring plan also if it becomes evident that:
1) to a material extent, the debtor fails to perform the obligations arising from the restructuring plan;
2) after at least a half of the term of validity of the restructuring plan has passed it is evident that the debtor is unable to perform the obligations assumed under the plan;
3) the debtor is not insolvent or has overcome the solvency problems and the restructuring of the claims of the creditor is no longer fair to the creditors due to material change of circumstances;
4) the debtor has, wilfully or due to gross negligence, submitted materially incorrect or incomplete information about their assets, property, income, creditors or liabilities;
5) the debtor has made payments to creditors not specified in the restructuring plan, thereby considerably harming the interests of other creditors;
6) the debtor does not assist the court or the advisor in the performance of the duty to supervise or does not give information which is necessary for exercising supervision;
7) the debtor fails to pay to the court’s deposit account the amount determined by the court for the purpose of covering the fees and expenses of the advisor or expert.
(3) In the event of annulment of the restructuring plan, the consequences of declaring the debt restructuring application admissible shall lapse retroactively. The right of claim of the creditor whose claim was restructured under the restructuring plan shall be restored against the debtor in the initial amount. Thereby the gains of the creditor in the course of implementation of the restructuring plan shall be taken into account.
(4) The court shall make the annulment of the restructuring plan public, publish a notice on the annulment in the official publication Ametlikud Väljaanded and, after the annulment has entered into force, inform thereof the enforcement officer conducting the suspended enforcement proceedings and the court conducting the suspended judicial proceedings. The court may have the advisor perform the duty to inform.
(5) If the restructuring plan is annulled and within three months following the annulment a bankruptcy petition is filed against the debtor, the claims of compensation of the fees and expenses of the advisor and expert shall be deemed as protected in these proceedings.

Chapter 6 Amendment of Acts 

§ 40.  The Law of Property Act (RT I 1993, 39, 590; 2010, 38, 231) is amended as follows:


1) subsection (7) shall be added to § 279 worded as follows:
“(7) A pledgor who is not a debtor may lodge the same objections against a claim secured by the pledge, which may be lodged by the debtor or a surety. The pledgor may also lodge objections if the debtor does not contest the claim.”;
2) a second sentence shall be added to subsection 335 (3) worded as follows:
“The mortgagee may not demand additional security or partial payment of the debt if the value of the immovable, where the main housing of a natural person is located, decreases due to a change in the market situation of immovables.”;
3) subsection 346 (1) is amended and worded as follows:
“(1) A mortgage, to the extent of the sum of the mortgage, secures a claim, interest (including default interest) for up to three years before the sale of the immovable in enforcement proceedings, debt collection expenses, including the costs of the enforcement proceedings and the enforcement officer’s fees, and the insurance premiums paid by the mortgagee on behalf of the owner of the immovable.”;
4) a second sentence shall be added to subsection 346 (2) worded as follows:
“A security agreement shall be valid, in the event of a change of the owner of an immovable encumbered with a mortgage, also with regard to the new owner and, in the event of a change of the mortgagee, with regard to the new mortgagee.”;
5) subsection 351 (3) shall be repealed.

§ 41.  The Taxation Act (RT I 2002, 26, 150; 2010, 72, 544) is amended as follows:


1) the words “as well as upon restructuring debts by reducing them in reorganisation proceedings or in debt restructuring proceedings” are added to the first sentence of subsection 114 (2) after the words “bankruptcy proceedings”;
2) The words “as well as if the income tax arrears arose from the sale of the assets and property of the taxable person as a security of a debt of a third party in enforcement proceedings or bankruptcy proceedings.” are added to the first sentence of subsection 114 (3) after the words “force majeure ”;
3) section 1141 is added to the Act worded as follows:
“ § 1141. Restructuring tax arrears and release from tax arrears
(1) The provisions of this Chapter do not restrict the restructuring of tax claims and release from them in the reorganisation proceedings of a legal person or in the debt restructuring proceedings of a natural person or in the event of a release from debt in bankruptcy proceedings pursuant to the procedure provided for in specific Acts.
(2) If in the restructuring of tax claims and releasing from them in the reorganisation proceedings of a legal person, the approval of a compromise in bankruptcy proceedings or restructuring the debts of a natural person (undertaking) constitutes state aid for the purposes of the Competition Act, the tax authority shall follow the provisions of § 341the Competition Act.”;
4) clause 6) is added to subsection 132 (4) worded as follows:
“6) upon submission of the debtor’s reorganisation petition or debt restructuring application.”;
5) subsections 133 (1) and (2) are amended and worded as follows:
“(1) The Tax and Customs Board shall represent the state upon collection of tax arrears in liquidation, bankruptcy, reorganisation, debt restructuring and judicial proceedings.
(2) Upon collection of tax arrears in liquidation, bankruptcy, reorganisation, debt restructuring and judicial proceedings, a rural municipality or a city shall be represented by an agency of the rural municipality or city, which has the powers of a tax authority, or by the regional structural unit of the Tax and Customs Board pursuant to the competence delegated to it in a contract under public law on the basis of the Local Taxes Act.

§ 42.  The Bankruptcy Act (RT I 2003, 17, 95; RT I, 12.11.2010, 1) is amended as follows:


1) section 41 is added to the Act worded as follows:
Ҥ 41. Entry into force of rulings
A ruling declaring bankruptcy shall be valid and subject to enforcement as of making it public. A ruling rejecting a bankruptcy petition as well as a ruling dismissing a bankruptcy petition or terminating proceedings shall be valid and subject to enforcement as of its entry into force.”;
2) subsection (4) shall be added to § 5 worded as follows:
“(4) A ruling made by a circuit court on the basis of an appeal filed against a ruling of a county court shall be valid and subject to enforcement as of its entry into force in accordance with subsection 466 (3) of the Code of Civil Procedure, unless the circuit court decides that its ruling is subject to immediate enforcement.”;
3) clause 14 (1) 4) is amended and worded as follows:
“4) the bankruptcy petition of the debtor is based on a claim regulated by a reorganisation plan or a debt restructuring plan.”;
4) in the introductory part of subsection 171 (2) the words “shall not commence proceedings for the release of a debtor from his or her obligations” are replaced with the words “is permitted not to commence proceedings for the release of a debtor from their obligations”;
5) subsection (21) shall be added to § 171 worded as follows:
“(21) The commencement of proceedings for the release of a debtor from their obligations shall not be impeded by the fact that the debtor has previously applied for debt restructuring and the debt restructuring proceedings have terminated.”;
6) subsection (6) shall be added to § 172 worded as follows:
“(6) With good reason, especially in the event where the appointment of a trustee would clearly result in unfounded expenses and the court is convinced that the debtor is able to perform the duties of a trustee themselves, the court may refuse to appoint a trustee and order the debtor to perform the duties of a trustee. In such an event the court shall verify whether the debtor performs their duties.”;
7) subsections 173 (3) and (4) are amended and worded as follows:
“(3) Claims of income earned from the employment or service relationship or another similar relationship of the debtor or claims of income earned from business shall be deemed to have been transferred to the trustee. The trustee shall inform the person obligated to pay the fees thereof.
(4) The trustee shall hand over 25 percent of the income specified in subsection (3) of this section to the debtor. Considering the circumstances, the court may set a different rate.”;
8) subsection (11) shall be added to § 175 worded as follows:
“(11) Considering the circumstances, the court may release a debtor, who has performed their duties and obligations as required, from duties and obligations not performed in bankruptcy proceedings also before five years have passed from commencement of the proceedings, but not before three years have passed from commencement of the proceedings, especially if the debtor has performed their duties and obligations during the proceedings as required and satisfied the claims of the creditors to a considerable extent.”;
9) subsection (51) shall be added to § 175 worded as follows:
“(51) If the court finds that a release of the debtor from obligations is not justified, the court may extend the proceedings and set for the debtor an additional term after the expiry of which the application for a release from the duties and obligations shall be heard again. The term shall not exceed seven years after commencement of the proceedings.”

§ 43.  Subsection (101) is added to § 57 of the State Fees Act (RT I 2010, 21, 107; 2010, 72, 542) worded as follows:

“(101) A state fee of 300 euros shall be paid upon submission of a reorganisation application. A state fee of 30 euros shall be paid upon submission of an application for restructuring the debts of a natural person.”

§ 44.  The Code of Civil Procedure (RT I 2005, 26, 197; 2010, 38, 231) is amended as follows:


1) subsection (5) shall be added to § 132 worded as follows:
“(5) For the purposes of the value of an action, a claim for declaring compulsory enforcement impermissible is considered non-patrimonial. The value of an action set by the court with regard to such a claim shall not exceed 3000 euros.”;
2) subsection (41) shall be added to § 478 worded as follows:
“(41) If a ruling is made public, it shall enter into force and be subject to enforcement as of the pronouncement, unless otherwise provided by law.”.

§ 45.  The General Part of Civil Code Act (RT I 2002, 35, 216; 2010, 38, 231) is amended as follows:


1) subsection 39 (41) is repealed;
2) in subsection 157 (1) the text “30 years” is replaced with “10 years”;
3) in subsection 157 (4) the words “and fall due in the future shall commence when each separate claim falls due” are replaced with words “is regulated by § 154 of this Act”;
4) clause 31) is added to subsection 160 (2) worded as follows:
“31) submission of the debtor’s reorganisation petition or debt restructuring application;”.

§ 46.  Clause 23 (1) 4) of the Security Act (RT I 2003, 68, 461; 2010, 22, 108) is repealed.

§ 47.  The Code of Enforcement Procedure (RT I 2005, 27, 198; 2010, 38, 231) is amended as follows:


1) subsection (41) shall be added to § 23 worded as follows:
“(41) In the event of the enforcement titles specified in clauses 2 (1) 19) and 191) a pledge contract, security agreement and the basis and detailed calculation of the principal and collateral claims shall be submitted to the enforcement officer.”;
2) subsection (11) shall be added to § 221 worded as follows:
“(11) In the event of enforcement of an enforcement title other than a judicial decision, above all, in the event of the enforcement titles specified in clauses 2 (1) 18)-191) of this Code, the debtor can lodge any and all objections arising from the enforcement title against the existence and validity of the claim in an action for declaring compulsory enforcement impermissible.”;
3) subsection 221 (3) is amended and worded as follows:
“(3) An action may be filed until the end of enforcement proceedings.”.

§ 48.  The Law of Obligations Act (RT I 2001, 81, 487; 2010, 77, 590) is amended as follows:


1) subsection 113 (2) is amended and worded as follows:
“(2) If the time for performance of a financial obligation has not been determined, among other things, in the event of a claim for compensation of damage or a claim for recovery of the gains of unjust enrichment or a claim for recovery arising from withdrawal, default interest shall be calculated on the amount payable as of the time when the creditor informed the debtor of their claim or filed an action for collection of the money or an application for expedited proceedings of a payment order. If the time of payment of a fee has not been determined in the event of a mutual contract, default interest shall be calculated on the fee as of the time provided for in subsection 821 (1) of this Act.”;
2) a second sentence shall be added to subsection 113 (5) worded as follows:
“Regardless of payment of the default interest, the creditor may claim that the debtor compensate for reasonable costs of collection of the debt caused by the delay.”;
3) in subsection 143 (1) the word “consumer” is replaced with “natural person”.

§ 49.  Subsection (4) is added to § 9 of the Law of Obligations Act, General Part of the Civil Code Act and Private International Law Act Implementation Act (RT I 2002, 53, 336; 2010, 77, 590) worded as follows:

“(4) The provisions of subsection 157 (1) of the General Part of the Civil Code Act regulating the limitation period applies to non-expired claims that have emerged before 1 March 2011. If the term specified in subsection 157 (1) of the General Part of the Civil Code Act in force before 1 March 2011 expires before the term specified in the first sentence of this section, subsection 157 (1) of the General Part of the Civil Code Act in force before 1 March 2011 shall apply to the limitation period.”.

Chapter 7 Entry into Force and Implementation of Act 

§ 50.  Entry into force of Act

This Act shall enter into force on 5 April 2011.

§ 51.  Implementation of Act

The debt restructuring proceedings apply in the event of duties, obligations and liabilities which have emerged before the entry into force of this Act.
Ene Ergma
President of the Riigikogu

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