Austria: Major Changes In Personal Bankruptcy Law

On 28 June 2017 the Austrian Parliament passed the government's legislative proposal on insolvency law (Insolvenzrechtsänderungsesetz 2017). After lengthy negotiations, the government finally agreed to shorten personal insolvency proceedings to a maximum five years and to abolish the minimum insolvency quota of 10 % under certain conditions. The amendments will be applicable as of 1 November 2017.

Personal bankruptcy in Austria

Austrian insolvency law provides two different types of proceedings for insolvent individual debtors to reach a debt discharge. In a first instance, an insolvent debtor is obliged to offer its creditors a settlement plan (Zahlungsplan), which shall include a quota corresponding to the expected income situation in the next five years, payable within the following seven years. If the creditors decline such a settlement plan, the debtor may request that proceedings for income levy with subsequent debt discharge (Abschöpfungsverfahren) be initiated, in which any attachable income of the debtor exceeding the subsistence level will be used to satisfy creditors. Until now debtors were granted a debt discharge as soon as the creditors received the minimum quota of 10 % within a period of seven years, and under certain circumstances the court could also grant a debt discharge if the quota was slightly lower than 10 % and/or if it took up to 10 years to reach it.

No minimum quota, reduced length

The amendment aims to lower the requirements for a debt discharge and to reduce the length of insolvency proceedings for individual debtors. In particular small- and medium-size entrepreneurs whose business has failed and who are personally liable for the company's debt often cannot reach the 10 % quota. Even if the restructuring proceeding of a former insolvent company was successful, many shareholders have to file for insolvency due to their personal liability for the company's debt (eg guarantees, sureties). Experience has shown that only a third of former failed entrepreneurs are able to pay the minimum quota without external help.

Thus the following changes of Austrian personal bankruptcy law were enacted:

  • Individual debtors who are not entrepreneurs no longer have to seek an out-of-court settlement with their creditors prior to the launch of insolvency proceedings. Experience has shown that very few efforts to reach such an out-of-court settlement have in fact succeeded.
  • If a debtor is unlikely to have any attachable income or only has an income slightly above the subsistence level (within the next five years), there is no need to offer a settlement plan. The explanatory remarks on the government bill indicate that EUR 10 to 20 may be considered as "slightly above the subsistence level", depending on the circumstances of the case. In such a case, the debtor may switch to proceedings for income levy with subsequent debt discharge.
  • The duration of the proceedings for income levy with subsequent debt discharge will be reduced from seven (up to 10) years to five years.
  • The debtor's request for the initiation of proceedings for income levy with subsequent debt discharge may be rejected if the debtor is not employed or if he does not try to find employment or rejects an offer of employment. The same applies to persons who are or were part of a management body of a legal entity if that entity violated its disclosure and cooperation obligations in insolvency proceedings against the legal entity.
  • If the debtor has no (attachable) income, he is obliged to report to the insolvency court about his efforts to find a job at least once a year. The debtor shall be in breach of this obligation if he does not report within a grace period of two weeks set by the insolvency court.
  • The proceedings for income levy with subsequent debt discharge shall be completed and the debtor shall be granted debt discharge five years after the commencement of the proceedings. There is no minimum quota.
  • The changes as stated above will become effective as of 1 November 2017. Transitional provisions ensure that pending proceedings for income levy with subsequent debt discharge may end on 1 November 2022 at the latest upon request by the debtor.

Easy debt relief?

It remains the priority of all debtors with attachable income to offer a settlement plan. In addition, proceedings for income levy with subsequent debt discharge may not be opened if the debtor is not employed, does not make any efforts to obtain employment or declines appropriate offers of employments. Only persons with extremely low income (subsistence level or below) and poor job prospects may take immediate advantage of the facilitations in the proceedings for income levy with subsequent debt discharge and will benefit from the amendments.

In all other cases, the creditors may insist on a settlement plan based on the income which the debtor will or could achieve within the next five years. If the debtor fails to provide such a plan at all, proceedings for income levy with subsequent debt discharge, no minimum quota and a maximum duration of five years cannot be initiated.

The debtor is obliged to be employed, or to endeavour to be employed, and must not enter into new debts that cannot be paid when due and payable. In addition, an unemployed debtor or a debtor with no attachable income has now to report to the insolvency court about his efforts to take up employment at least once a year. Upon application of a creditor, culpable infringements of such obligations may lead to the early termination of the proceedings if creditors are compromised thereby.

A creditor may also subsequently request that the court revoke the debt discharge if a debtor intentionally infringed its obligations and thereby significantly compromised the satisfaction of the insolvency creditors. Such a request may be filed within two years after the decision on debt discharge became enforceable.

Further amendments

Additional amendments include various adaptations to the European Regulation (EU) 2015/848 on insolvency proceedings (EIR), eg the content of an insolvency claim filing, publications in the insolvency database, increases to the remuneration of insolvency practitioners, and further technical adjustments. Provisions regarding coordination and cooperation in insolvency proceedings of members of a group of companies as stated in the EIR have been incorporated and are thus applicable to national matters.


The abolishment of the minimum quota and the shortening of insolvency proceedings to five years for individual debtors will primarily concern low-income and less qualified individual debtors. Debtors with income more than slightly above the subsistence level will continue to have to offer settlement plans, including an individual minimum quota, for the next five years. Debtors making use of the facilitations are still obliged to seek employment and now also have to report to the insolvency court about their efforts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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