Fewer people facing debt collection... but debtors now owe more per person. Credit: Freepik.

Number of Debt Collections Drops, While Average Debt Per Person Rises

The number of people in the Czech Republic facing debt collection procedures dropped to 683,200 at the end of June, 14,800 fewer than at the end of last year, but the average debt has risen to CZK 80,000, an increase of CZK 4,200 from six months ago, according to Eva Rajlichova, spokesperson for the Czech Chamber of Executors.

The average amount that the debtor has to repay and that the bailiffs collect has also increased by CZK 5,600 since the end of 2021, to CZK 488,500.

The President of the Chamber of Executors, Jan Mlynarcik, said the decrease may be due to the suspension of so-called “petty distraints”, debts lower than CZK 1,500 from which nothing had been received for the past three years. The enforcement of such small debts has been suspended since January.

Late 2021 and early 2022 saw the “summer of grace” in the Czech Republic. This allowed debtors to repay their original debt to the state or other public bodies, along with a CZK 908 fee to the executor, between 28 October and 28 January; in return they were forgiven all interest, penalty fees and other additional payments. Tens of thousands of debt collection proceedings have ended through this measure so far.

From September, there will be another three-month period of debt clearance.

At the end of June, the chamber registered almost 4.17 million items of debt from 683,239 debtors. At the end of 2021, 698,028 debtors were registered in 4.43 million debt collections proceedings.

The number of debt collections has been decreasing over the past few years. In 2018, the chamber registered almost 4.68 million cases; in 2019, there were 4.5 million and in 2020, the first year of the COVID-19 pandemic, they registered 4.42 million debt collection proceedings.

The number of debtors has also been decreasing since 2017. Five years ago, debt collection was imposed on 863,000 people, which dropped to 790,000 in 2019 and then further to 732,900 in 2020, according to the chamber’s data.

Within the first six months of this year, 222,082 debt collection proceedings started. Last year, the number of new proceedings within the same period was 226,018.

The chamber data reveal that an average debtor is 46 years old and faces six debt collection cases, with CZK 488,533 to pay. This average has increased by CZK 5,632 in the past six months. Half of the indebted people owed more than CZK 147,976 each, a drop in the median figure of CZK 8,285 compared to the end of last year.

The statistics show that each debt collection recovers CZK 79,959 on average, which is CZK 4,182 less than at the end of last year.

According to the chamber, the regions with the highest rates of people facing debt collection are the Karlovy Vary, Usti, and Liberec Regions. The regions with the lowest rates of debtors are Vysocina and Zlin.

Experts have warned that the COVID-19 epidemic combined with the economic crisis may cause a rise in the number of debtors and collection proceedings. Mlynarcik noted that the amount of new proceedings is now stable and the financial problems caused by the coronavirus restrictions are not yet reflected in the number of new cases.