Banca rotta—the broken bench. According to legend, Italian bankers in Renaissance Florence who could not pay their debts were compelled to destroy their counting tables in public view. Whether myth or fact, the etymology of “bankruptcy” has fixed in our minds an image of insolvency as catastrophe, disgrace, terminus.
Modern insolvency law tells a different story. Not of punishment, but of order. Not of ending, but of beginning again.
Two Faces of Insolvency
In ancient Athens, a debtor who could not satisfy his creditors became a slave—he himself, his wife, his children. Only the reforms of Solon abolished debt bondage, making Athens an exception in the ancient world.
For centuries, the law oscillated between these two poles: punishment for the debtor versus protection from creditors. The English Statute of Bankrupts of 1542 treated the bankrupt as a criminal. Only the nineteenth century introduced the concept of the fresh start—the possibility of discharge and return to economic life.
Polish insolvency law—following a profound reform in 2016—stands decidedly in the second tradition. The objective is not the annihilation of debtors, but rather:
- satisfaction of creditors to the greatest extent possible
- preservation of the enterprise, where economically justified
- enabling the honest debtor to start anew
Business Insolvency: Liquidation or Restructuring?
When an enterprise loses the capacity to meet its obligations, the law offers two paths:
Bankruptcy proceedings—when the company cannot be saved. The debtor’s assets pass to a trustee, who liquidates them and distributes the proceeds among creditors in strict order of priority: first the costs of proceedings, then employees, social security and the tax authorities, and finally—typically with a modest recovery rate—unsecured creditors.
Restructuring proceedings—when the company has a chance to survive. Polish law (since 2016) offers four procedures of varying formality:
- proceedings for approval of an arrangement—the simplest, almost extrajudicial
- accelerated arrangement proceedings
- arrangement proceedings
- remedial proceedings—the most invasive intervention, permitting withdrawal from unfavourable contracts and workforce reductions
The choice of procedure is a strategic decision. Restructuring too early may be unnecessary. Too late—impossible. The line between “temporary difficulties” and “insolvency” can be as fine as a razor’s edge.
Management Under Pressure: Liability for Delay
The law imposes on management an obligation to file for bankruptcy within thirty days of the onset of insolvency. This deadline is absolute—and unforgiving.
A board member who exceeds it faces:
- personal liability for the company’s debts to creditors
- criminal sanctions—failure to file in time carries a penalty of up to one year’s imprisonment
- prohibition from conducting business activity—for up to ten years
This is among the most severe sanctions in Polish commercial law. And among the most frequently enforced.
The paradox is that management often learns of insolvency too late—by the time the accountants concede that the situation is dire, the thirty-day clock is already running, and sometimes has already expired.
Consumer Bankruptcy: A Second Chance for Individuals
Since 2020, Polish law has dramatically liberalized consumer bankruptcy. Any natural person—even one who caused their own insolvency through negligence or recklessness—may apply for debt discharge.
The procedure typically lasts from several months to three years. At its conclusion—if the debtor coöperates with the trustee and fulfills the repayment plan—the court discharges unpaid obligations. Completely and definitively.
This is a revolution whose consequences remain underappreciated. A person trapped in a spiral of debt—loans, guarantees, failed investments—can legally begin again. The fresh start has ceased to be an American myth.
But note: consumer bankruptcy is not a free lunch. The debtor loses assets (with exceptions), their data enters public registers, and certain obligations—alimony, compensation for criminal acts—are not subject to discharge.
The Creditor: Victim or Player?
Insolvency law is often presented from the debtor’s perspective. But for the creditor—the supplier awaiting payment, the bank with an unpaid loan, the counterparty to an unperformed contract—a partner’s insolvency is a catastrophe.
A good creditor’s lawyer knows that:
- filing a proof of claim within the deadline is the absolute priority (lateness means losing one’s place in the queue)
- security interests (mortgages, pledges) dramatically improve one’s position
- fraudulent transfer actions can recover assets the debtor removed before bankruptcy
- management liability can serve as an alternative source of recovery
Insolvency proceedings are a negative-sum game—creditors divide less than they are owed. The winner is the one who knows the rules.
Our Services
For debtors:
- analysis of financial situation and assessment of insolvency/restructuring grounds
- preparation and filing of bankruptcy and restructuring petitions
- negotiations with creditors and preparation of arrangement proposals
- representation before the insolvency court
- defence of board members against personal liability
- consumer bankruptcy—from petition to discharge
For creditors:
- filing and pursuing claims in insolvency proceedings
- challenging transactions made to the detriment of creditors
- pursuing claims against management
- representation on creditors’ committees
- arrangement and restructuring negotiations
Failure as Institution
Nassim Taleb has written that systems resilient to crisis require a mechanism for controlled failure—the capacity for individual collapse without systemic disintegration. Insolvency law is such a mechanism.
It permits companies to die—but in an orderly fashion, with protection for employees, with the chance to salvage valuable assets. It permits individuals to go bankrupt—but without lifelong debt bondage, with the prospect of a new beginning.
This is not pleasant law. No one plans for insolvency. But when it arrives—and sometimes it arrives despite the best of efforts—knowledge of the rules determines whether the story ends in catastrophe or merely a difficult chapter before the next.
Skarbiec Law Firm—insolvency and restructuring advisory for debtors and creditors.
