Brno - When you hear "debt crisis", you will probably think about recent fears that some European countries will be unable to finance their large budget deficits. But amid all the Aegean Contagion scare, we somehow tend to forget that people too can suffer from indebtedness. And the Czech Republic is starting to feel it.
Without any doubt, the global economic recession of 2008 and 2009 left its mark on the Czech Republic. However, while Czech companies are already recovering, many Czechs are still struggling, sometimes even more than in 2009.
The joblessness still remains a serious issue, and many Czechs who have indebted themselves in order to counter the negative effects of the recession are now unable to repay their debts, thus facing insolvencies and personal bankruptcies.
Read more: Economic recovery: Czech Rep lags behind Germany
Read more: Lost Generation: Young Czechs hit by unemployment
This is what companies that watch databases of debtors say. "In the last six months, we have been seeing a growing number of debtors who can fulfill their obligations only with great difficulties or are not able to fulfill them at all. The delinquency rate increases even though the total number of debts is decreasing," said Petr Fic from M.B.A. Finance.
The number of those who have had to declare personal bankruptcy is growing too. In September 2010, there has been 903 personal bankruptcy petitions, which is not only 120 more than in August, but it its the largest number registered since the personal bankruptcy option was introduced by the insolvency law.
"In the nine months of this year, the number of personal bankruptcy petitions was 2.5 times higher than in all the year 2009. In average, there has been 730 personal bankruptcy petitions and 480 personal bankruptcies declared every month. Last year, it was only 480 petitions and 287 bankruptcies," said Věra Kameníčková from the Czech Credit Bureau which collects the statistics about debtors.
Since personal bankruptcy proposals usually need six weeks to be processed, experts do not expect the number of personal bankruptcies to decrease in the following months.
Read more: Greek Flu? Czech bond yields to surge by 0.4 percent
People losing their homes
The number of involuntary auction sales is growing too. In the first nine months of this year, their number has grown to 531, which is more than double in comparison with the first nine months of 2009.
"The number of involuntary auction sales is growing in direct proportion to the growing number of people who cannot pay their mortgages and other types of loans secured by real estates," Libor Nevšímal from Naxos said to the Czech Press Agency (ČTK).
Real estates serve to secure loans by non-bank lenders too. "Debtors do not think about what they oblige to by signing the contract," said Josef Machů from the Prokonzulta auction firm.
This situation can be exploited by real estates speculators who can buy the debtors' real estates for much lesser price than is their real value.
