Legal Aspects of Insolvency of Natural Persons in the Baltic States

• Author: Goda Ambrasaite, Rimvydas Norkus
• Pages: 176-185

176 JURIDICA INTERNATIONAL 21/2014

Goda Ambrasait Rimvydas Norkus

Dr., Associate Professor Dr., Professor

Mykolas Romeris University, Vilnius Mykolas Romeris University, Vilnius

Judge, Vilnius Regional Court Judge, Supreme Court of Lithuania

Legal Aspects of

Insolvency of Natural Persons

in the Baltic States

1. Introduction

After several years of intense discussions, the Law on Personal Bankruptcy of the Republic of Lithuania

(LPB) came into force, on 1st March 2013. Lithuania was the last of the Baltic States to introduce a legal

mechanism to deal with insolvency of a natural person to its legal system. In Estonia, provisions for pro-

ceedings for release of a debtor who is a natural persons from obligations took effect in 2004 (via Chapter

11 of the Bankruptcy Act), while in Latvia they were introduced in 2008 and substantially amended in 2010,

with a view to facilitating and increasing the availability of bankruptcy proceedings.

The LPB is often criticised as being too laconic and leaving too many questions to be resolved by judicial

practice, which has only begun its evolution. The purpose of this article, therefore, is to analyse the main

features of the model for bankruptcy of a natural person as chosen by the Lithuanian legislator, in compari-

son with the legal regulation of the other states in its region—Latvia and Estonia—with particular emphasis

on the principle of good faith and the need to balance the interests of the debtor and creditors. The authors

attempt to assess whether initial judicial practice corresponds to the intents of the legislator and propose

some solutions for more effective functioning of the legal institution of personal bankruptcy.

2. Objectives in the establishment of a legal basis

for bankruptcy of a natural person, adoption of the Law

on Personal Bankruptcy of the Republic of Lithuania,

and f‌i rst experiences in its application

The modern doctrine of a ‘fresh start’ ref‌l ects the difference between the previous paradigm, of punishment

for an insolvent person, and the recent focus on economic activeness and eff‌i ciency*1. By legalising the

bankruptcy of an individual, two, at f‌i rst glance contradictory, aims are pursued: to protect the interest of

creditors and to grant a fresh f‌i nancial start to the debtor by releasing him from some debts. In the opinion

1 P. Astromskis et al. Fizinio asmens bankroto problema: teisiniai aspektai [‘The problem of bankruptcy of a natural person:

Legal aspects’]. – Jurisprudencija 121 (2010)/3, p. 214 (in Lithuanian).

http://dx.doi.org/10.12697/JI.2014.21.16