Blog · Credit and the law

When a loan becomes unmanageable.

Personal insolvency, payday loans and real borrower protection in Bulgaria and Europe. Bulgaria has a new personal insolvency procedure, and Parliament is debating a new Consumer Credit Act. The two reforms have to be judged together — and the key question is what will change for people with several bank and non-bank loans.

Published: 10 October 2026 · legal check as of 10 October 2026

3 Aug 2026

Register launched

The Natural Persons Insolvency Register at the Registry Agency

12+ months

Unable to pay

One of the conditions under Art. 8 of the Act

10 × min. wage

Debt threshold

Debts due above ten monthly minimum wages

14 days

For creditors’ objections

From the publication of the application in the register

The context

Two laws, one credit system.

Bulgaria’s Natural Persons Insolvency Act (in Bulgarian, ЗНФЛ) was promulgated in the State Gazette in July 2025 and began to apply in practice once the specialised register launched on 3 August 2026. It allows a general court procedure for a debtor who is insolvent and acting in good faith, and — under certain conditions — the discharge of claims that remain unpaid. It is not an automatic credit amnesty.

On 11 September 2026 a bill for a new Consumer Credit Act (No. 52-602-01-41) (in Bulgarian) was tabled, and it passed its first reading on 23 September. As of 10 October its final adoption has not been confirmed. The proposals for a more thorough creditworthiness assessment are a draft, not law in force.

The logic of the two reforms is consistent: a sensible assessment before lending; early restructuring when difficulties arise; a fair process for creditors and the debtor in lasting insolvency.

Payday loans

Why payday loans are the critical test.

The non-bank loan market serves a legitimate purpose when someone is temporarily short of money. But the high cost, short terms and the build-up of loans from several lenders can create a debt spiral. It is not fair to lump all lenders together, nor to claim without evidence that 90% of them will disappear from the market.

The current Consumer Credit Act caps the annual percentage rate of charge (APRC) at five times the statutory interest rate. Claims that “100% is officially allowed” are not a general legal rule. A high real cost can arise from additional mandatory services and guarantees that have been wrongly left out of the total cost of credit.

Case C‑337/23 at the EU Court of Justice. This judgment, arising from Bulgarian practice, is especially important: when taking out a guarantee contract is a mandatory condition of the loan, its cost is part of the total cost of credit. The legal consequences for any particular contract are assessed case by case.

The problem is not simply the high rate, but also granting yet another loan despite available data showing that the borrower cannot service the debts they already have. A negative credit history, several active loans and insufficient free income call for a genuine, documented and verifiable assessment of ability to pay.

The new requirements may curb business models that depend on systematically lending to over-indebted people. That will not happen automatically: what matters is the quality of the checks, the availability and accuracy of the data, and real penalties for breaches. Lenders already have a duty to assess — the question is how well it is carried out and enforced.

Europe

What is useful for Bulgaria.

Country	How it works
Germany	The standard procedure usually allows discharge of remaining debts after three years — in return for duties to cooperate and to hand over income that is subject to enforcement.
France	The administrative over-indebtedness scheme focuses on assessing the situation, on plans and on restructuring measures, and in certain circumstances on writing debts off.
Ireland	Different procedures for unsecured and secured debts. The usual discharge from bankruptcy is after one year, but income obligations and other consequences may continue.
Sweden	Usually a five-year repayment regime, with supervision and protection of the money needed for basic living costs.

The lesson is not that the shortest term is the best. A working model has to combine accessibility, predictability, safeguards against hiding assets, and a real chance of financial recovery. National regimes cannot be compared mechanically.

The conditions

Personal insolvency is not forgiveness on request.

Under Art. 8 of the Act, insolvency means being unable to pay, in full or in part, one or more monetary debts that are due, with a total value above ten minimum monthly wages, for more than 12 months. That alone is not enough: the debtor must also act in good faith under Art. 9 and meet the requirements of Art. 31. Under Art. 2 the Act does not apply to certain debts arising from the business of sole traders and entrepreneurs.

Your mortgage, your home and your guarantors. Personal insolvency does not guarantee that you keep a mortgaged home, and guarantors and co-borrowers are not released. What exactly happens is explained in the next section.

The first two months in numbers

Applications published in the register

3 August to 2 October 2026, according to the Registry Agency

Proceedings opened

As of 2 October 2026

Applications at the Sofia District Court

All of them deficient

€6,202

Threshold of 10 minimum wages

At the 2026 minimum monthly wage of €620.20

The low number is not necessarily a failure of the law. It shows how far the simple formula “10 wages, 12 months” is from the actual legal text. By Ruling No. 29179 of 12 August 2026 in civil case No. 22831/2026, the Sofia District Court left an application pending until it was corrected, requiring a personally completed declaration, evidence of assets, income and debts, bank account statements, a repayment plan, proof of notifying the National Revenue Agency and the court fee. The request to stay enforcement proceedings was refused because the deficient application was not supported by written evidence.

There is also an open question about the threshold itself: which minimum wage applies. At the date of the application the threshold is €6,202. If the wage at the start of the 12-month period is used — €550.66 in 2025 — it would be about €5,507. There is no case law yet to settle the point.

Free legal aid. Preparing the application does not necessarily require a paid lawyer. Bulgaria’s National Legal Aid Bureau can provide free help with the documents and representation in court — through a request to the Bureau itself, through one of its 27 regional advice centres, or through a request to the court filed with the application.

The Registry Agency figures, the number of applications at the Sofia District Court and the court ruling are cited from the legal analysis by lawyer Martin Kostov published in Focus (in Bulgarian).

Your home, guarantors, your family

What happens to your home — and to the people who signed with you.

These are the questions most people care about. The answers are in the Act itself — here they are in brief, with the articles they rest on.

If your home has a mortgage

The bank keeps its mortgage. It retains its rights and is paid first from the sale of the property (Art. 15(3) and Art. 16(1)(1) of the Act).
A sale already under way does not stop. If the bank has already started selling the property, the insolvency proceedings do not halt it (Art. 40(3)).
Your only home is not protected from the bank that holds the mortgage on it. The protection of a debtor’s only home does not apply when the sale is sought by the creditor that holds the mortgage (Art. 11 of the Act and Art. 445(1) of the Civil Procedure Code).
The remainder can be discharged. If the sale does not cover the debt, the bank joins the other creditors for the remainder (Art. 76(1)), and that remainder can be discharged under the conditions of the Act (Art. 97 and 98). If the price exceeds the debt, the surplus goes to the other creditors (Art. 76(2)).
Until the property is sold, the mortgage debt is not discharged (Art. 104(1)(1)).

In short: personal insolvency does not save a mortgaged home. It can free you from the remainder the sale does not cover.

If your home has no mortgage

As a rule, your only home is exempt: it is not part of the insolvency estate and cannot be enforced against, provided neither you nor your family own another home (Art. 11 of the Act and Art. 444(7) of the Civil Procedure Code). If your debts are only unsecured loans — payday loans, for example — your only home is, as a rule, protected. The Civil Procedure Code allows exceptions, for instance for maintenance obligations or for damages from a tort (Art. 445(2)).

If someone signed with you

Guarantors and co-borrowers are not released. Even if your debts are discharged, theirs remain (Art. 104(2)).
The relief in a repayment plan does not apply to them — not to guarantors, not to joint debtors, and not to anyone who mortgaged their own property for your debt (Art. 63(3)).
Cases against them do not stop. Proceedings for claims secured on third parties’ property continue (Art. 39(3)).
Property a third party mortgaged for your debt stays encumbered. Those claims are not discharged either (Art. 104(2)).

In practice, you may be released from the debt while the bank pursues your guarantor or co-borrower for the entire unpaid remainder. In Bulgaria these are often a spouse, parents, children or close friends. Before you file, talk to them — and to a lawyer about the options: an agreement with the lender, restructuring, or a repayment plan that leaves as little as possible unpaid to those creditors.

Why the law works this way: a guarantee exists precisely for the case in which the borrower cannot pay. If the borrower’s insolvency also released the guarantor, the guarantee would become worthless exactly when it is needed. German law works the same way.

How to apply

12 practical steps.

Check that the Act applies to you

Establish that you are a natural person outside the exceptions in Art. 2, and check the test in Art. 8: more than 12 months unable to pay, and debts due above ten minimum monthly wages. What counts is the total of debts already due, not the sum of all future instalments.

Art. 2, Art. 8

Assess your good faith

Taking on clearly disproportionate new debts, disposing of assets, hiding income, being out of work without good reason and giving false information can all be obstacles. With several payday loans, legal advice is especially important.

Art. 9

Work out your total debt

Make a full table of every bank and non-bank loan: lender, company number, contract, original amount, principal, interest, disputed fees, amount due, date of default, collateral, and any court or enforcement case. Do not leave out other creditors — the procedure covers them all.

Annex B

Gather the evidence

Loan contracts and annexes, written statements of the balance, demand letters, court rulings, enforcement documents; documents on employment, income, assets and charges. A Central Credit Register extract is useful but does not replace the contracts and statements.

Fill in the official declaration

Use the Ministry of Justice template. It covers family and civil status, good faith, assets, rights, income, creditors, court cases and significant payments. Do not replace it with a document of your own.

Art. 32(2)(1)

Get statements for every account

From every bank and every other payment service provider, including payment apps and institutions. Do not leave out an account just because its balance is zero.

Prepare a repayment plan

Realistic income, necessary expenses, available assets, possible payments and timescales. If you have nothing to spare, say so honestly and explain the plan — do not promise payments you cannot make.

Art. 32(2)(4)

Notify the tax authority

File the notification to the National Revenue Agency under Art. 78(2) of the Tax and Social Security Procedure Code and keep proof that you filed it. It is a required annex to the application, even if loans are your main problem.

Art. 32(2)(5)

Identify the court and check the fee

The competent court is the district court for your current address at the time of filing. Check the current fee schedule and that court’s payment details. Attach proof of payment, or a reasoned request for exemption under Art. 83(2) of the Civil Procedure Code. An exemption from the fee does not cover the costs of the insolvency itself.

Art. 25

File a signed application with all annexes

Describe your employment, your insolvency and your assets, and ask for proceedings to be opened. Attach the declaration, the evidence, the statements, the plan, proof of notifying the tax authority, the fee document or exemption request and — if you use a representative — an express power of attorney.

Art. 32(1)

Watch the register and notices

Once the application is published in the register, creditors have 14 days to object. If anything is missing, the court will give instructions. Deadlines often run from publication in the register — do not wait for a letter.

Cooperate after the decision

The court assesses the conditions and may open proceedings and appoint a trustee; there are special consequences if assets are insufficient. Declare changes promptly and do not hide assets. Filing alone does not stop every enforcement — the court may order interim measures.

Art. 34

After filing

What happens next.

Under Art. 33 the court may ask for further evidence, and creditors have 14 days from the publication of the application to object. If proceedings are opened under Art. 35, the court appoints a trustee. Under Art. 36, if the assets do not cover the initial costs, proceedings may be opened and then stayed — with special consequences and a duty to make periodic declarations.

No debt is wiped out on the day you file. There is a separate regime for discharging debts where the conditions in the Act are met; timescales and exceptions are assessed case by case. Claims secured by a mortgage or a pledge, the liability of third parties and debts that cannot be discharged all need to be assessed separately.

A disputed payday loan

How to protect yourself.

Ask for a detailed statement and copies of the contract and its annexes.
Check whether a guarantee, surety or other mandatory service is included in the real cost of the loan.
If you suspect unfair terms or an unfair practice, contact the Consumer Protection Commission and a lawyer.
If you receive an enforcement order or a bailiff contacts you, act at once — the deadlines can be short.
Do not sign an acknowledgement of disputed sums without having it reviewed.
Do not take another loan just to pay off the last one.

What should improve

Five changes on which success depends.

Verifiable documentation of the real assessment of income, expenses, all known debts and credit history.
Penalties that reflect the economic gain from the breach, and effective oversight of mandatory guarantees, sureties and hidden credit costs.
Early restructuring of loans that can genuinely recover, with particular care for mortgaged homes.
Public statistics on applications, proceedings opened and refused, duration and costs — without identifying anyone.
Accessible guidance and legal aid for people who cannot gather the necessary evidence on their own.

FinHome’s takeaway. The reform will succeed not simply by creating a personal insolvency procedure, but by combining more responsible lending, control of hidden costs, effective restructuring and a realistic second chance for the insolvent debtor who acts in good faith. The lender’s right to collect what is lawfully owed and a citizen’s right to financial recovery are not mutually exclusive.

Annex

Working templates.

These are NOT official government forms, and they are for filing in Bulgaria, in Bulgarian. They help you organise the information. The official declaration under Art. 32(2)(1) of the Act is approved by the Minister of Justice and is downloaded separately — the Ministry of Justice template (in Bulgarian). Do not replace it with our worksheets.

A. Sample application to the district court

TO THE DISTRICT COURT – [TOWN]

FROM: [FULL NAME], personal ID number [ ], current address [ ], phone / email [ ]

APPLICATION to open insolvency proceedings under Art. 32 of the Natural Persons Insolvency Act

Your Honour, I ask you to open insolvency proceedings on the following grounds:

1. Employment and income: [description and documents].
2. Insolvency: [since when, amount of debts due, causes, unsuccessful attempts to pay].
3. Assets, accounts and collateral: [description].
4. Circumstances showing good faith: [description and evidence].

I ask you to accept the annexes under Art. 32(2) of the Act and to rule in accordance with the law.

Annexes: 1) official declaration; 2) evidence; 3) statements; 4) plan; 5) notification under the Tax and Social Security Procedure Code; 6) fee or exemption request; 7) power of attorney, if any.

Date: [ ] Signature: [ ]

B. Creditor worksheet

Creditor	Company no.	Contract / date	Amount due	Principal	Interest / fees	Due date	Collateral	Case / bailiff	Notes

C. Assets and income worksheet

Asset / right	Owner / share	Value	How and when acquired	Charges	Exempt from enforcement	Document

Income in the last 12 months	Source	Period	Net amount	Evidence

Payment above one minimum wage in the last 12 months	Date	Recipient	Amount	Reason

D. Working repayment plan

Provable monthly income: [ ]
Necessary living costs: [ ]
Other unavoidable expenses: [ ]
Monthly amount available for creditors: [ ]
Assets that could be sold: [ ]
Proposed order and timing of payments: [ ]
Reasoning and risks: [ ]

E. Sample notification under Art. 78(2) of the Tax and Social Security Procedure Code — guidance text only

TO THE COMPETENT TERRITORIAL DIRECTORATE OF THE NATIONAL REVENUE AGENCY

From [name, personal ID number, address].

I hereby notify you of my intention to file an application to open insolvency proceedings under the Natural Persons Insolvency Act before the District Court of [ ]. Please confirm receipt of this notification.

Date, signature.

Check the exact procedure for notifying the National Revenue Agency, and how it confirms receipt, before filing.

Sources and legal check:

Natural Persons Insolvency Act, State Gazette No. 54 of 4 July 2025 (in Bulgarian)
Natural Persons Insolvency Register — Registry Agency (in Bulgarian)
Official declaration under Art. 32(2)(1) — Ministry of Justice (in Bulgarian)
Consumer Credit bill No. 52-602-01-41 — National Assembly (in Bulgarian)
Ordinance No. N-5, amendments, State Gazette No. 114/2025 (in Bulgarian)
EU Court of Justice, case C‑337/23
Martin Kostov, lawyer: analysis of the register’s first two months, Focus, October 2026 (in Bulgarian)
Civil Procedure Code, Art. 444–445 — property exempt from enforcement and the exceptions to the protection of a debtor’s only home (in Bulgarian law)

Legal check as of 10 October 2026. This article is general information, not individual legal advice, and does not guarantee that proceedings will be opened or debts discharged. Before filing, confirm the current court fee, the procedure for notifying the National Revenue Agency and the declaration template.

Before the next loan — a real budget.

The best protection against a debt spiral is knowing how much credit your income can really carry. A free preliminary assessment from a FinCity credit consultant, with no commitment.

Check your budget

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