Total collections proceedings in the Czech Republic are down, but the number of people under multiple collections proceedings is up
The number of collections proceedings and the number of people involved in them continues to decline in the Czech Republic. However, the proportion of debtors facing multiple collections proceedings at the same time is growing.
During the second quarter of this year, 631,500 people were involved in roughly 3.7 million collections proceedings. Year-on-year, there are almost 10 % fewer cases and roughly 4 % fewer debtors.
Compared to the pre-pandemic year of 2019, the number of people under collections proceedings and the number of proceedings are both down by about 20 %. However, while 72 % of debtors were under more than one collections proceeding simultaneously five years ago, this year 77 % are.
The data comes from the Debt Map project. The Institute for the Prevention and Resolution of Overindebtedness (Institut prevence a řešení předlužení) collaborates on the project with the PAQ Research agency.
Those organizations use data from the Chamber of Collections Agents, the Justice Ministry, and the Office of Statistics. In the second quarter of this year, 631,500 people were involved in a collections proceeding.
Of those, one-tenth were under 30 years of age. Collections agents were enforcing the payment of debts worth CZK 573.8 billion [EUR 230 million].
Per debtor, that is an average debt of CZK 908,578 [EUR 36,000], with each collections proceeding worth CZK 155,140 [EUR 6,000] on average. In the second quarter of last year, there were 659,100 people under collections proceedings.
In Q2 of 2023, CZK 613.4 billion [EUR 245 million] worth of debts was being enforced. The average debtor had to pay off CZK 930,647 [EUR 37,000].
In 2016, 834,000 persons were under collections proceedings. The total number of proceedings back then was 4.46 million.
The number of people under collections proceedings reached its highest peak so far in 2017. There were 863,000 people under such proceedings in the country of 10 million.
The authors of the project say the highest peak so far for the total number of proceedings was reached in 2018, with almost 4.68 million proceedings underway. What contributed to the decline in the number of cases and debtors was the halting of what are termed petty collections proceedings and the “Summer of Mercy” debt relief law.
The first round of that law started in the autumn of 2021, while the most recent round is coming to an end at the close of November this year. If by that time people pay off the principal of what they owe to selected institutions, they will not have to pay penalties and other fees under certain conditions.
According to the amendment to the bankruptcy law that was adopted, this autumn the timeframe for regular debt relief will be reduced from five years to three. The Czech Government’s National Economic Council (NERV) has been recommending making debt relief available to a bigger number of people as one measure to promote economic growth.
According to experts in social issues, overindebtedness is a basic obstacle to lawful employment. People prefer to work “under the table” to avoid the compulsory deductions from their officially reported wages up to the minimum that cannot be confiscated by law, and the economy loses when they do so.
This affects development in some regions of the Czech Republic, and the differences between regions in this regard are intensifying. Experts point out that this impacts election results and that the inclination to extremism is on the horizon as a result.
