Court says debt relief rules can cover people able to pay

Latvia’s Constitutional Court has ruled that some provisions of the law on releasing individuals from debt obligations are unconstitutional because they do not ensure that relief is limited to people unable to pay. The Saeima must amend the provisions, LSM reported.

The court found that the rules violate the first three sentences of Article 105 of the Constitution, which protect the right to property. The case followed a complaint by a licensed debt recovery service provider, which challenged criteria based on a person’s income and status, as well as the maximum debt eligible for relief.

When a person is released from debt obligations, creditors lose their claims, the court said. It recognised that debt relief can help people who cannot pay because of their financial circumstances regain solvency and participate more fully in the economy, and can support groups the state has committed to protecting.

But relief is justified only when a person is objectively unable to meet their obligations. Income level or membership in a group specified by law does not by itself establish that inability. A person with low income may still have assets or savings and relatively low expenses.

The court said a proper assessment must consider a person’s income, expenses and assets. The current rules do not ensure a full assessment of their financial circumstances.