Creditor arrangement or insolvency: ways to get out of debt
Both paths are designed to deal with obligations that cannot be paid as scheduled. A lawyer explains when it is worth reaching an arrangement and when an insolvency proceeding might be more appropriate.
A person who has difficulty meeting repayments and receives warning letters, attachments, or demands from creditors may face two options that sound similar: reaching a creditor arrangement or initiating an insolvency proceeding. In both paths, the goal is to deal with debts that cannot be repaid in their current format, but the path, the degree of intervention in the debtor's life, and the possible outcome are quite different.
Creditor arrangement
The accepted term "creditor arrangement" is called "debt arrangement" in the law. The idea is to offer creditors an agreed outline: for example, a one-time payment of part of the debt, a new installment plan, or a combination of both. Such an arrangement can be formed even without initiating an insolvency proceeding, and in appropriate cases, it can be brought to the court for approval. After its approval in accordance with the conditions in the law, the arrangement may also bind creditors who did not support it.
A common mistake is to think that an arrangement is possible only if all creditors agree in advance. The law establishes voting and approval mechanisms, and under certain circumstances, the court has the authority to approve an arrangement even when full agreement has not been reached. However, this does not mean that any proposal can be forced upon the creditors. The court examines, among other things, the consideration they are expected to receive in the arrangement compared to the alternative of an insolvency proceeding.
An arrangement has a clear advantage when there is a real ability to provide an amount that will allow creditors to receive reasonable consideration. The source can be savings, the sale of an asset, family assistance, or income that allows meeting the established payments. In such a situation, it is sometimes possible to resolve the debts without entering a full insolvency proceeding, within which there is supervision, reporting obligations, and various restrictions. A legal amendment that came into effect in 2026 also anchored the possibility of requesting a temporary stay of proceedings for the purpose of formulating a debt arrangement. Even on this path, there is judicial supervision, an arrangement manager, and certain restrictions, and it is not an automatic "time out" from every debt.
Insolvency
An insolvency proceeding is intended for situations where the difficulty is not point-specific but deeper. According to the law, insolvency occurs when a person is unable to pay their debts on time, or when the value of their liabilities is higher than the value of their assets. After the issuance of an order to open proceedings, dealing with the creditors is done within a collective and supervised framework, instead of each creditor acting separately.
In the proceeding, the debtor's income, expenses, assets, and the circumstances of their entanglement are examined. The debtor is required to report on their financial situation, meet payments and instructions set for them, and a trustee supervises the proceeding. Subsequently, as long as the debtor meets the conditions of the proceeding, an order for financial rehabilitation will be issued, which includes, among other things, instructions regarding payments and the realization of assets. If the debtor meets the established conditions, the proceeding is expected to end with a discharge of debts. The discharge is not automatic, and there are debts that the law limits or denies the possibility of receiving a discharge from.
Therefore, when there are a large number of creditors, active execution office files, a large gap between the scope of debts and the ability to repay, and no realistic source for financing an arrangement, insolvency may be the more appropriate framework. Its advantage is the creation of one path that concentrates the handling of debts and seeks to reach financial rehabilitation. The price is a more formal proceeding, including supervision and restrictions. A preliminary examination of the full picture allows choosing a path that minimizes damage and increases the chance of returning to stable financial conduct.
