More than half of borrowers limit their income, experts advise determining an adequate income

More than half of borrowers limit their income, experts advise determining an adequate income

More than half of borrowers limit their income, experts advise determining adequate earnings

Prague – More than half of debtors with multiple foreclosures are trying to limit legal income. Due to the conditions, deductions and the possibility of receiving benefits, they prefer to work in the gray economy. This was shown by research among more than five hundred borrowers, conducted for non-profit organizations by the PAQ Research agency. In the experts' debate on the upcoming debt relief amendment, the agency's head, Daniel Prokop, presented the results. Experts recommend adjusting the conditions of debt relief and establishing an adequate income.

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At the end of January, according to the Executor's Chamber, there were over 4.1 million foreclosures in the Czech Republic. 672,400 borrowers had them, of which around 166,000 had ten or more proceedings at the same time. According to data from the Institute for the Prevention and Solution of Over-indebtedness, 19,200 people applied for debt relief last year. The debt relief process lasts five years, three years for senior citizens. If 30 percent of the debt is not repaid within that time, the court decides. The amendment being prepared adopts the European directive on debt relief, which shortens the period to three years.

“The number of people with multiple foreclosures is increasing. For more than four foreclosures, the increase is drastic. People with so many foreclosures have no other way out of the debt trap than through debt relief. But the number of people in debt relief is decreasing. We have to do something, or the situation will worsen.” warned Daniel Hůle from the organization People in Need.

According to the survey, 54 percent of debtors with debts that cannot be settled within five years admit to limiting their official earnings. “More than half of economically active people say that they reduce their legal income in some way. They keep money on their hands, minimize their income in order to limit deductions. People also get benefits from which they do not deduct,” explained Prokop.

< p>Employers also complain about executions. They have administrative costs and find workers difficult. “It's coming back to us. We don't have employees, or we can't hire people. Some leave their jobs after two months,” complained the head of the logistics company Tomáš Urban.

The National Economic Council of the Government (NERV) also focused on execution. According to calculations, income restrictions could affect 140,000 to 200,000 people. The state could thus lose five to 12 billion kroner annually in taxes and levies. According to Prokop, the limitation of work or recognized earnings also affects the development of regions. Purchasing power is decreasing, failure in education and the number of early school leavers are increasing, there is less tax collection.

Experts recommend setting an adequate income for debt relief, which a person could have according to his age, qualifications and place of residence. According to NERV, setting a minimum income limit will create pressure to legalize earnings. For example, for a fifty-six-year-old woman from Prague with a high school diploma, according to Hůle, it could amount to 28,500 crowns gross. With a three-year debt relief, the creditor could receive approximately 223,500 crowns and pay taxes and levies 114,700 crowns. Now, after five years of debt relief, the woman admits 20,400 crowns gross. The creditor will receive 133,100 crowns and the state will receive 35,100 crowns, but other expenses will be covered by benefits. from the gray economy,” noted economist Miroslav Zámečník.

Representatives of creditors and other critics reject shortening the process and changing other conditions. They only agree to a three-year debt relief for entrepreneurs, not for other debtors.