Czech Constitutional Court to decide whether debt relief also covers costs of proceedings

Editorial note: this article was published before the Constitutional Court announced its judgment; the outcome is not reflected here.

In the coming week, the Czech Constitutional Court will deal with a case that has the potential to fundamentally affect the interpretation of the rules on debt relief (oddlužení) and costs of court proceedings. It concerns a situation that can happen to practically any business: what happens to the costs of proceedings if the debtor successfully completes debt relief?

The story of a debtor who was released — but perhaps not from everything

The complainant in this case was a debtor of a company which sued him for payment of more than CZK 225,000 plus default interest. The district court upheld the claim and ordered the complainant not only to pay the amount claimed but also to reimburse the costs of proceedings. The complainant appealed, but then came a turning point — debt relief proceedings were opened in respect of him and the proceedings had to be stayed.

When the insolvency proceedings ended and the complainant was discharged from his debts, the claimant withdrew the action. Logically — the main claim had been settled in the debt relief. The regional court therefore set aside the original judgment of the district court and discontinued the proceedings. But then came the catch.

The regional court ordered the complainant to pay the costs of proceedings at both levels. It argued that the complainant was responsible for the discontinuation of the proceedings. And above all — in the regional court's view, the right to reimbursement of costs arises only from a final decision that is constitutive in nature. Therefore, according to the court, these costs are not covered by the discharge under Section 414(1) of the Czech Insolvency Act. Put simply: we forgive your past debts, but you will pay the costs of proceedings that arose only after the debt relief.

A key legal question for business practice

The complainant fundamentally disagrees with this interpretation and turned to the Constitutional Court. His arguments rest on several pillars. Above all, he argues that the costs of proceedings are an accessory of the main claim and should be covered by the discharge under the Insolvency Act in the same way as the main debt. If the main claim was settled in the debt relief, why should its accessory remain outside the discharge regime?

The complainant also points to Supreme Court case law according to which the discharge also covers costs of proceedings conducted during the debt relief. What should be decisive for applying the discharge is therefore not the formal moment when the costs arose, but their substantive connection with the original debt.

The case has considerable practical significance for business. Imagine that your business partner successfully completes debt relief. As a creditor, you know you can no longer recover the main claim — it was settled in the insolvency proceedings. Does it make sense to continue litigation solely because of the costs of proceedings? And if so, how will the courts approach it?

The Constitutional Court's decision may set clear rules of the game. Either it will confirm that costs of proceedings are indeed a separate claim that arises only from the court's decision and does not fall under the debt relief, or it will accept the complainant's argument and recognise that the accessory shares the fate of the main claim, including its extinction as a result of the discharge.

For creditors, the decision is key in terms of debt recovery strategy. If the Constitutional Court sides with the complainant, continuing litigation against persons who have completed debt relief will lose its economic purpose, because the costs of proceedings would share the fate of the main claim. Conversely, if the regional court's interpretation prevails, creditors will have an incentive to continue disputes even after the debtor's debt relief has ended — at least as regards the costs of proceedings.

For debtors who have successfully completed debt relief, the decision is equally important. It gives them an answer to the question of whether they can really rely on debt relief meaning a clean slate, or whether the costs of court proceedings may catch up with them later.

The public announcement of the judgment was scheduled for 1 September 2026 at 2 p.m.

Source: Czech Constitutional Court, IV. ÚS 1277/26