With the publication in the State Gazette, issue 54 of 4 July 2025, of the Personal Insolvency Act, Bulgaria filled a longstanding gap in its national legal framework. Until the Act came into force, Bulgaria was the only EU Member State without a comprehensive personal insolvency regime — a gap that caused serious social and economic hardship for individuals burdened with unsustainable debts.
1. Legislative background
The Act fulfils one of Bulgaria's key obligations under the National Recovery and Resilience Plan. A transitional period was provided during which the Ministry of Justice brought into operation a new Insolvency Register. All relevant acts and procedural steps are recorded there; applications for the opening of personal insolvency proceedings became possible only after the Register went live.
2. Scope and key definitions
2.1. Conditions for insolvency
A debtor is insolvent if, for at least 12 months, they are unable to pay debts exceeding ten statutory minimum monthly wages. A key element is the debtor's good faith, as defined in Art. 9 of the Act: a debtor acts in good faith if they assumed obligations proportionate to their assets and income and did not act to the detriment of creditors. The Act sets out an exhaustive list of circumstances that negate good faith, including:
- a criminal conviction for offences against creditors;
- unjustified absence from employment;
- failure to fulfil income-declaration obligations;
- gratuitous disposals of assets of significant value;
- assuming obligations clearly disproportionate to income;
- providing false information or obstructing the insolvency practitioner.
2.2. Exclusions from scope
The Act does not apply to the debts of sole traders, craftsmen or entrepreneurs — those remain governed by the Commercial Act.
3. The insolvency procedure
3.1. Opening and preliminary measures
Proceedings are opened on the debtor's application to the district court at their current address. The application must contain comprehensive information on employment, insolvency and assets, accompanied by the required documents and declarations and by a debt-repayment plan. The court may request additional evidence and may of its own motion order interim measures — attachment, encumbrance or suspension of enforcement proceedings against the debtor.
3.2. Opening of proceedings and the insolvency practitioner
Once the statutory conditions are met, the court declares the insolvency, opens the proceedings and appoints an insolvency practitioner. The practitioner supervises the fair conduct of the procedure and acts on behalf of the insolvency estate. From the opening of proceedings, the debtor loses the right to enter into transactions involving the management or disposal of their assets without the practitioner's consent, except for current expenditure for basic living needs. All pending judicial and arbitral proceedings against the debtor are stayed; enforcement proceedings are terminated, subject to the exceptions provided by law.
3.3. Repayment plan
A key stage is the preparation of a repayment plan, which may provide for deferral or instalment payments for up to three years. The creditors' meeting votes on the plan; the court confirms it if the statutory requirements are met. The confirmed plan is binding on the debtor and all creditors with claims arising before the decision to open proceedings.
3.4. Declaration of insolvency and realisation of assets
Where no repayment plan is confirmed, the court declares the debtor insolvent, strips them of the right to manage or dispose of the insolvency estate and orders realisation of assets. All obligations become due and payable from the date of the declaration. The insolvency estate comprises all the debtor's assets — including assets held under a matrimonial community property regime — with the exception of exempt assets, among which is the debtor's sole dwelling used as their permanent home.
3.5. Distribution of realised assets
After realisation, the insolvency practitioner prepares a distribution schedule among creditors in accordance with the order of priority in Art. 16 of the Act. Claims not submitted in the proceedings and rights not exercised are extinguished.
4. Effects of insolvency
The Act provides for two main ways in which the debts of a good-faith debtor are discharged: through performance of a confirmed plan or upon exhaustion of the insolvency estate. In the latter case, the court's decision discharges the unsatisfied claims, with the exception of specifically designated non-dischargeable obligations — fines, maintenance obligations and damages for tort.
How we can help
We advise individuals on the conditions for opening proceedings, prepare the application and repayment plan, and represent the debtor before the court and the creditors' meeting. Contact us for an assessment of your specific situation.
Note
This article is for general information only and does not constitute legal advice. Legislation changes over time — for current, binding guidance on your case, please contact us.