Lithuanian courts: Personal bankruptcy cannot erase divorce debts

Lithuanian courts have clarified that filing for personal bankruptcy cannot be a loophole to escape debts incurred through divorce settlements. In a recent case, a man sought to discharge a 50,000 euro debt owed to his ex-wife, which originated from a peace agreement made during their divorce.

This agreement was a compromise to resolve disputes over marital property, avoiding a lengthy legal battle. However, the debtor failed to make the payment. Years later, he filed for personal bankruptcy, hoping to be released from this obligation.

The creditor argued that bankruptcy should not be a tool to avoid responsibilities agreed upon to settle property disputes. Courts examined not only the debtor's insolvency but also his conduct. They found he had agreed to the large sum without realistically assessing his financial capacity and later made no significant effort to improve his financial situation. He did not seek better-paying work, refused to cut expenses, and only paid under duress.

Judges concluded this behavior did not meet the standard of an honest debtor. "Personal bankruptcy is not a mechanism for discarding inconvenient obligations," explained Egidijus Kieras, an associated partner at AVOCAD. "This institution is for the honest debtor who genuinely seeks to settle with creditors and makes maximum efforts to restore solvency. Courts are increasingly evaluating not just formal insolvency, but also how the individual behaved when undertaking and fulfilling their obligations."