Banks, administrators rip bankruptcy law fixes

Take note – story published 9 years ago

The Saeima voted Thursday to support some key proposals in an amendments bill addressing the Law on Bankruptcies, however thereby prompting bankruptcy administrators and commercial banks to dispute the attempted legislative fixes.

Among the passed amendments, one provides for bankruptcy administrators to acquire the status of state officials, requiring them to recuse themselves from freely practicing law or providing related legal services, as no such requirement or status had been provided for. Critics have said the law’s current provisions leave open the possibility for potential improprieties and ethical conflicts among Latvia’s sworn advocates serving as insolvency overseers.

Yet the Certified Bankruptcy Administrators' Association on its part announced its objection to the amendment, as spokeswoman Justīne Plūmiņa called the proposal and the discussions which led to its adoption  "unprofessional and cliched," reported LETA. She told the national information agency the group may petition the President not to promulgate the law and instead throw it back to the Saeima agenda for repeated vetting.

"There are acute and as-yet unresolved problems with the bankruptcy administration process, such as the involvement of fictional creditors, raiding at auctions, pilfering of corporate assets and immunity of board members from prosecution for burying accounting documents and assets and many others we have pointed out. Instead, the deputies refuse to take them on, instead hiding behind the change-of-status proposal, which in reality changes nothing in the process," she stated the insolvency administrators' association's opposing viewpoint.

Another key motion approved today is a provision for introducing the “dropped-off keys” principle, which eases the declaration and closure of personal bankruptcy cases for owners of single homes declared as collateral on debt. The proposal had been considered to be a long-shot, having been struck from previous draft bills. It provides for properties used as collateral in bankruptcy proceedings to be sold in auctions whereby creditors lose their claims against the debtor in cases where the property is their sole place of residence.

Within hours of the reported changes to the law, the Commercial Banking Association and various individual banks began issuing statements announcing the discontinuation or tightening of recently-approved first-time homeowners' loan requirements for low-income families. According to leading financial services institution Swedbank statement Thursday, "the law adopted today will force lenders to raise the down payment sums as well as the income criteria for borrowers, which makes the home-loans support program pointless." Thus the country's top homeowners' lender announced its departure from the government-sponsored guaranteed loan program.

The commercial bank's Private Financing Decisions Center chief Ainars Balcers went on to remark that "the legislature with one hand is trying to foster availability of credits, but with the other is significantly putting the brakes on the process."

The amendments are not retroactive, therefore can apply only to credits handed out by banks following their entering into effect after January 1, 2015 if promulgated by the President.

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