Principles of Debt Restructuring and Restrictions on Initiation of Debt Restructuring Proceedings

Author:Toomas Saarma
Position:Trustee in Bankruptcy
Toomas Saarma
Trustee in Bankruptcy
Principles of Debt
Restructuring and Restrictions
on Initiation of Debt
Restructuring Proceedings
The purpose of this article is to determine the basic principles of debt restructuring proceedings and the
content thereof and how these are applied and to research what the basic principles should be for debt
restructuring proceedings, alongside what the rules and restrictions should be on the initiation of debt
restructuring proceedings. The article compares the regulations enacted in other countries pertaining to
release from debt and contrasts these against the Debt Restructuring and Debt Protection Act*1 (DRDPA) in
force in Estonia and current judicial practice.
1. The basic principles of debt restructuring—
what they are and what they should be
According to the views expressed in legal literature*2, the basic principles of debt restructuring can be
encapsulated in three tenets:
1. Debt restructuring proceedings shall provide fair and equitable, ef cient and cost-effective,
accessible and transparent settlement and discharge of consumer debts.
2. They shall propose some form of ‘fresh start’ for the debtor.
3. There shall be equally available options of extra-judicial and judicial proceedings.
In the case of the second and third principle, the consumer may be offered a choice between a payment
schedule and immediate release. In both cases, an extended period of insolvency proceedings has no ben-
e t for a debtor without a portion of income against which a claim for payment cannot be made or without
prospects for reaching a better nancial position within reasonable time. Legislators should offer consumer
1 Võlgade ümberkujundamise ja võlakaitse seadus [‘Debt Restructuring and Debt Protection Act’], entering into force on
5.4.2011. – RT I, 6.12.2010, 1 (in Estonian). English text available via (most recently accessed on
2 U. Reifner, J. Niemi-Kiesiläinen, N. Huls, H. Springeneer. Overindebtedness in European Consumer Law: Principles from
15 European States. Norderstedt: Books on Demand GmbH 2010, pp. 34–47; INSOL International Consumer Debt Report—
report on ndings and recommendations (May 2001), pp. 1–31. Available at (most recently
accessed on 30.5.2013).

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