Personal bankruptcy represents the last resort for over-indebted individuals to free themselves from financial burdens and start anew. One of the key elements of this procedure is the discharge of obligations – a legal mechanism that allows debts that could not be repaid during the process to be forgiven. However, the discharge does not apply to all types of claims. This article explains in detail which obligations are discharged and which remain even after the procedure has concluded.
The main law governing personal bankruptcy and the discharge of obligations in Slovenia is the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act (ZFPPIPP). Chapter 5 of the ZFPPIPP sets out the rules of bankruptcy proceedings, while section 5.11 regulates personal bankruptcy procedures.
Article 382 of the ZFPPIPP defines the purpose of personal bankruptcy proceedings: according to the first paragraph, the procedure is conducted so that all creditors receive payment of their ordinary claims against the debtor from the debtor’s assets simultaneously and in equal proportions. In a personal bankruptcy procedure, the debtor’s assets are sold and the proceeds are distributed equally among the creditors, though some types of claims are paid with priority.
If the debtor files the petition, they must demonstrate insolvency and attach the following information and documents: a list of all assets and liabilities, a list of all creditors and debtors, information about their financial condition, proof of income and expenses, and a description of the reasons for insolvency.
A key mechanism in personal bankruptcy proceedings is the discharge of obligations (Articles 398 and following of the ZFPPIPP). The debtor may, along with the bankruptcy petition or later, request that the court, after a specific probation period (usually from 1 to 3 years), discharge those debts that cannot be repaid from the bankruptcy estate. Personal bankruptcy does not necessarily mean that all debts are forgiven. The debtor will not receive a discharge of all obligations in every case. For certain types of debts, discharge is not possible, as explained below.
Article 408 of the ZFPPIPP provides a clear rule: the discharge of obligations applies to all creditor claims against the debtor that arose before the start of the personal bankruptcy procedure, regardless of whether the creditor filed the claim in the proceedings. This is extremely important, as it means that even creditors who did not register their claims in the bankruptcy proceedings can no longer enforce them after the discharge is granted. For sole proprietors, it is important to note that debts arising from business activity are also discharged — that is, debts incurred while the person operated as a sole trader (s.p.).
To obtain a discharge, the debtor must demonstrate honesty and cooperation throughout the entire process — they must not conceal assets or create new debts in bad faith, must regularly inform the court and trustee about their income and financial changes, and must comply with all rules during the probation period. Under Article 399 of the ZFPPIPP, a discharge cannot be granted if certain legal obstacles exist. These include cases where the debtor has been convicted of a property-related or economic criminal offense; if, within three years before the start of bankruptcy, they provided false information to the tax authority resulting in an additional tax assessment of at least €4,000; if they have already been granted a discharge in the past ten years; if, within three years before bankruptcy, they assumed obligations disproportionate to their assets; or if they transferred property gratuitously or for negligible value when they could have fully met their obligations. The court assesses whether any of these obstacles are present, applying the principles of good faith and fairness and considering possible abuse of the right to discharge. If an obstacle is found, the discharge is denied.
However, the law strictly defines exceptions — obligations that remain even after discharge. Creditors may continue to enforce these claims after the personal bankruptcy procedure is concluded. Obligations unaffected by discharge include: child and spousal support (alimony) obligations, employment-related claims such as unpaid wages and wage compensations for the six months prior to bankruptcy, compensation for work-related injuries and occupational diseases, unpaid severance payments, compensation for damage due to reduced quality of life or loss of working ability, fines imposed in criminal proceedings, and penalties and social security contributions.
During the procedure and for a certain time afterward, the debtor has limited access to taking on new financial obligations (e.g. loans) and, in some cases, may face restrictions regarding certain types of employment (e.g. positions in supervisory bodies).
When the court issues an order granting discharge and it becomes final, the debtor’s financial situation changes fundamentally. They are freed from all obligations to which the discharge applies, meaning that creditors can no longer legally enforce the forgiven debts.
The discharge of obligations in personal bankruptcy is a powerful tool for resolving severe financial distress, but it does not erase all debts. The law clearly distinguishes between debts that can be discharged and those that remain even after the discharge procedure.
Before filing a petition for bankruptcy, it is strongly recommended to consult a legal professional. A lawyer or legal advisor can help you assess your specific situation, advise you on available options and next steps, and represent you during the process.