The Great Debt Event, or the Summer of Grace begins

What is the goal of the Summer of Grace?

There are undoubtedly several goals. One is to make the whole foreclosure system easier. Currently, there are about three quarters of a million Czech men and women in the system, which places an enormous burden on the courts, bailiffs and authorities. That is, on the state apparatus and the economy in general. As a result, individual foreclosures have a devastating impact on the families and lives of debtors. Combined with other current phenomena, such as rising inflation and energy prices, as well as the next wave of covid, the state must look for ways to relieve those most burdened.

Who is potentially affected by debt relief?

The lower hundreds of thousands of people affected by foreclosure of debt with a public entity, health insurance company or other creditors who have joined the action. The drafters of the proposal themselves say that they would consider it a success if, for example, a tenth of these persons successfully went through the debt relief process. In practice, however, it turns out that for some of the intended target group, insolvency remains out of reach. For others, the promise is unattainable: the erasure of debt without any cooperation or payment on their part.

Conversely, some people would like to join but cannot. This applies, for example, to people in insolvency. Even debtors who normally pay their debts and are not in foreclosure cannot take advantage of the action. Nor does it apply to people with tax or administrative foreclosures.

Which creditors are affected?

Some entities are designated directly by law, be it the state, the region, municipalities, state and regional or municipal contributory organisations, health insurance companies, Czech Television and Czech Radio and other public entities. Private entities can also join the campaign voluntarily, as Czech Savings Bank, Air Bank and Home Credit have already done.

What specifically is forgiven?

The ideal target group for the Gracious Summer event are debtors of small amounts that have, however, swelled over the years and in the context of an ongoing foreclosure. There have been many cases in which a rent arrearage on a municipal apartment or a public transport fine of several hundred crowns has turned into a ten-thousand-dollar debt as a result of poorly set laws by adding disproportionate interest and fees. For many debtors, these already represent an unsolvable situation.

Thanks to the Summer of Grace, debtors can pay only the original principal (essentially the basis of the debt), i.e., for example, the aforementioned CZK 500 public transport fine. To this, they add CZK 908 as a fee for the bailiff and the whole matter is solved for CZK 1408.

However, the condition is that the entire principal amount is repaid. Persons who have really high original debts may not use the action, because even repayment of the principal alone, e.g. tens of thousands of crowns, may be unrealistic for them.

How can I join the Summer of Grace as a borrower?

First, contact your bailiff, or bailiffs if there are several foreclosures, and find out the outstanding principal amount of the debt. A registered letter is the ideal way to send your enquiry. Once you have considered your options for repaying the debt, you should inform the bailiff by letter that you wish to take advantage of the Gracious Summer event and deposit the appropriate amount plus CZK 908 into the bailiff’s account. All this should be done preferably by the beginning of January next year, as the event itself lasts until 28 January 2022.

What is the result of the debt settlement?

Once the amount has been paid, the execution is stopped and the bailiff issues a decision to exempt the debtor from paying the so-called debt accessories, i.e. mainly interest, fees and costs related to the debt. However, the exemption does not apply to financial penalties for intentional offences, compensation for damage caused intentionally, compensation for personal injury and maintenance.

Where can I get advice on debt relief?

There are a number of institutions that can help you with debt relief. These include free debt advice centres or advice from People in Need.

If you would like a more individual approach, you can contact the experts at Affordable Advocate who will suggest a tailored solution.