Personal Bankruptcy in Bulgaria — Conditions and Procedure (2026)

What is personal bankruptcy and when does it become available?

Until July 2025, Bulgarian law did not recognise the concept of personal insolvency. Insolvency proceedings under Part IV of the Commercial Act were available only to traders. Individuals who accumulated debts they could not service had limited legal options: renegotiating with creditors, waiting for the statute of limitations to expire, or relying on enforcement exemptions for non-attachable property.

With the adoption of the ZNFL (promulgated in State Gazette No. 54 of 04.07.2025), Bulgaria transposed the requirements of Directive (EU) 2019/1023 on preventive restructuring frameworks, debt discharge, and measures to increase the efficiency of insolvency proceedings.

When will the procedure become operational?

Under Paragraph 6 of the Transitional and Final Provisions of the ZNFL, the Act enters into force 9 months after its promulgation, i.e. around the beginning of April 2026. The delayed effective date is necessary because the electronic module for natural persons in the Insolvency Register must be built first.

As of 23 March 2026, the module is not yet operational. It is expected to go live during April 2026. Until that date, applications for personal bankruptcy cannot be filed.

Who can file for personal bankruptcy?

The ZNFL defines three categories of persons who are eligible to file for insolvency.

1. Natural persons who are not traders. This is the broadest category and includes employees, retirees, unemployed persons, freelancers (who are not registered as sole traders), and all other individuals with debts in a personal capacity.

2. Sole traders (ET) and persons engaged in economic activity whose debts do NOT arise from that activity. If you are registered as a sole trader but your debts are unrelated to your trading activity, you can use the ZNFL.

3. Former sole traders. Persons who have deregistered as sole traders may file under the ZNFL within 1 year of deregistration.

Distinction from commercial insolvency

If you have a company (EOOD, OOD) with outstanding debts, the ZNFL is not applicable. See our article on company liquidation.

Eligibility conditions

For your application for personal bankruptcy to be admitted, four groups of conditions must be met cumulatively.

Minimum debt threshold

Your total debts must exceed 10 minimum monthly wages. For 2026, the minimum monthly wage is BGN 1,213 (EUR 620.20), which means the threshold is BGN 12,130 (EUR 6,202).

Duration of financial difficulties

Your financial difficulties must have persisted for more than 12 months. This condition filters temporary financial crises from sustained insolvency.

Insufficient attachable assets

The debtor must not have sufficient assets that could be directed toward satisfying creditors through enforcement proceedings. It is sufficient that assets are significantly less than the total amount of debts.

Good faith of the debtor

This is the most complex and critical condition. The ZNFL sets strict good faith requirements, with Art. 9, para. 2 listing 11 grounds for inadmissibility. An application is inadmissible if the debtor:

1. Has been convicted of a wilful crime of a general nature (unless rehabilitated)
2. Assumed obligations knowing they would be unable to fulfil them
3. Carried out dispositions of assets with intent to harm creditors
4. Provided false information about their financial situation when applying for credit
5. Concealed income or assets from enforcement proceedings
6. Failed to cooperate with the enforcement agent in pending cases
7. Generated debts as a result of gambling (unless treated for gambling addiction)
8. Has unfulfilled maintenance (alimony) obligations
9. Has previously filed under the ZNFL and received a discharge — the procedure may be used only once in a lifetime
10. Was a manager or majority shareholder in a company declared insolvent through their fault
11. Failed to file a tax return or fulfil public-law obligations when doing so was within their capacity

How the proceedings unfold step by step

The proceedings under the ZNFL pass through five main phases. The entire procedure is judicial and takes place before the district court at the debtor’s permanent address.

Phase 1: Filing the application

The application may be filed only by the debtor. It is filed with the district court and must be accompanied by 13 mandatory documents, including: a declaration of income and assets, a list of all creditors, a statement from the Central Credit Register, a certificate of (non-)conviction, and others.

The court fee for filing is EUR 10 (BGN 20).

Phase 2: Entry in the Insolvency Register and creditor objections

The court orders entry in the Insolvency Register. Creditors have 14 days to file objections.

Phase 3: Court hearing

Within 1 month after the objection period expires, the court holds a hearing and may grant the application, reject it, or leave it without progress.

Phase 4: Decision to open proceedings

The decision produces several immediate effects:

• Moratorium on enforcement — all enforcement cases are stayed, garnishments are lifted
• Appointment of a trustee (syndic) — an independent person who assumes management of attachable assets
• Prohibition on dispositions — the debtor loses the right to freely dispose of their assets

Phase 5: Determining the resolution path

After the proceedings are opened, the specific mechanism for resolving the debts is determined.

Three paths to debt resolution

1. Repayment plan

Applies when the debtor has regular income. The plan covers a period of up to 3 years (36 months). The debtor commits to setting aside a defined portion of income for payments. The remaining debts are discharged after successful completion.

2. Asset liquidation

Applies when the debtor owns attachable assets. The trustee prepares an inventory, assets are sold at public auction, proceeds are distributed among creditors. The unpaid balance is discharged.

3. No-assets procedure

Intended for debtors with neither assets nor sufficient income. A waiting period is set. After it expires, if the financial situation has not improved, the court orders debt discharge.

What property is protected?

Even during asset liquidation, the following assets are protected and may not be sold:

• The debtor’s sole dwelling (if not mortgaged)
• Essential household items: furniture, refrigerator, washing machine, stove, television
• Clothing and personal belongings of the debtor and their family
• Food supplies for three months
• Tools required for practising a trade or profession
• A minimum portion of salary/pension (EUR 620.20 for 2026)
• Agricultural land in minimum prescribed sizes

Which debts are NOT discharged?

• Secured claims (mortgage, pledge) — the bank retains the right to recover from the mortgaged property
• Fines and financial penalties from the Traffic Police (KAT), NRA, CPDP, or other administrative authorities
• Compensation for tort (non-contractual damages)
• Maintenance (alimony) obligations towards children or a former spouse
• Obligations arising after filing the application

For guarantors: If you are a guarantor on a debt of a person who received a discharge, your liability does not lapse. The discharge is personal and does not benefit third parties.

Costs

Persons with low income are entitled to legal aid under the Legal Aid Act.

Consequences of personal bankruptcy

• Entry in the Insolvency Register — public information, visible even after proceedings conclude
• Impact on credit history — obtaining new credit will be significantly more difficult for a prolonged period
• One-time use only — you may file only once in your lifetime
• Restrictions during proceedings — prohibition on free disposition of assets
• Consequences for guarantors — the discharge does not release persons who guaranteed your debts

Alternatives to personal bankruptcy

10-year absolute limitation period under Art. 112 of the ZZD

Any monetary obligation of a natural person is time-barred 10 years after it becomes due, regardless of interruptions. If your debts were accumulated more than 7–8 years ago, waiting for the limitation period may be a better strategy.

Out-of-court settlement with creditors

Renegotiation may include: reduction of the debt amount, instalment plans, partial write-off of principal, or a lump-sum settlement. The advantage is confidentiality and speed.

Mediation

A voluntary procedure with a neutral mediator, less expensive than court proceedings.

When should you choose personal bankruptcy?

• Your debts are large and there is no realistic prospect of repaying them
• Creditors refuse to renegotiate
• The limitation period under Art. 112 ZZD is far off (more than 5 years)
• Enforcement cases are creating serious pressure
• You need a moratorium on enforcement

Frequently asked questions

Conclusion

Personal bankruptcy under the ZNFL is a long-awaited instrument in Bulgarian law that will provide a genuine way out for individuals trapped in a debt spiral. The procedure offers three mechanisms: a repayment plan, asset liquidation, or a no-assets procedure, all of which can lead to debt discharge.

However, the proceedings carry serious consequences: public registration, restricted access to credit, a prohibition on repeated use, and potential asset liquidation. The strict good faith requirements ensure the procedure is accessible only to persons who genuinely need it.

The Innovires Legal team can help. We offer a preliminary assessment of your case, preparation of the application, and court representation. Contact us for a consultation.

This article is for informational purposes and does not constitute legal advice. The legal framework is current as of 23.03.2026 and is subject to change. For assistance with a specific case, please consult a lawyer.