Until recently, an individual in Bulgaria who could no longer pay their debts had no way out: enforcement could continue for years, interest kept accruing, and there was no procedure to draw a line under it. Bulgaria was the last EU member state without a general personal insolvency regime.
That changed with the Personal Insolvency Act, published in State Gazette No. 54 of 4 July 2025 and adopted as one of Bulgaria’s commitments under its Recovery and Resilience Plan. The Act entered into force on 8 July 2025. Applications have been possible since 3 August 2026, when the Minister of Justice brought into operation the part of the Insolvency Register that handles individuals’ cases — the register where every step of each case is recorded.
Who can use it
Good faith is the gatekeeper. The Act lists the circumstances that rule it out, among them:
- a conviction for an offence against creditors;
- refusing to work without good reason;
- failing to declare income as required;
- giving away valuable assets for nothing;
- taking on debts plainly out of proportion to income;
- providing false information or obstructing the insolvency practitioner.
How the procedure works
Application
The debtor applies to the district court for their current address, setting out their work, debts and assets in full, with the supporting documents, declarations and a proposed repayment plan.
Protective measures
The court can ask for more evidence and, on its own initiative, order interim measures — including suspending enforcement against the debtor.
Opening
If the conditions are met, the court opens proceedings and appoints an insolvency practitioner. From then on the debtor needs the practitioner’s consent for any transaction involving their assets, except ordinary living expenses. Court and arbitration cases against them are stayed, and most enforcement cases end.
Repayment plan
The plan can defer debts or spread them over up to three years. Creditors vote on it, and if it meets the legal requirements the court confirms it. A confirmed plan binds the debtor and every creditor whose claim arose before the proceedings opened.
If there is no plan
The court declares the debtor insolvent, removes their power to manage the estate and orders its sale. All debts become due.
Distribution
The practitioner distributes the proceeds in the statutory order of priority. Claims not lodged in the proceedings are extinguished.
What the estate includes — and the family home
The insolvency estate covers all of the debtor’s assets, including their share of property held jointly with a spouse. Certain assets are exempt, and the most important exemption is the debtor’s only home, used as their permanent residence — unless it is mortgaged: a mortgage creditor can still enforce against it.
The fresh start
For a debtor acting in good faith, debts are discharged in one of two ways: by completing a confirmed repayment plan, or — if assets are sold instead — by the court’s decision once the estate has been exhausted. Not everything is written off. Fines, maintenance obligations and damages for wrongful acts survive the procedure, as do debts that arose after the proceedings opened and secured debts to the extent of the collateral; guarantors and co-debtors remain liable.
Is it the right step for you?
Personal insolvency is a serious procedure with real consequences for your freedom to manage your assets. Before applying, it is worth checking whether part of the debt is void in any case — for example, unlawful penalties and interest in quick loans — and whether a negotiated settlement is still possible.
Questions clients ask
What does the Act actually do for an over-indebted person?
It provides a court-supervised procedure that ends either with a repayment plan or with the sale of non-exempt assets, after which the remaining debts of a good-faith debtor are written off.
Can I lose my home?
If it is your only home and you live there permanently, it is exempt from the insolvency estate — unless it is mortgaged, in which case the mortgage creditor can still enforce against it. Other property, including second homes, can be sold.
Can a business owner use this procedure?
Not for business debts of sole traders or entrepreneurs, which remain subject to the Commerce Act. Private individuals who own shares in a company can apply in respect of their personal debts.
This guide is general information about Bulgarian law as it stood on the date of publication. It is not legal advice for your specific case.
