The deputies sent the bill, which will speed up bankruptcy proceedings and make them more effective, for its second reading Oct. 26.

"The law will speed up the process of clearing debts," said Deputy Prime Minister for the Economy Martin Jahn. "It'll also boost the credibility of bankruptcy proceedings, and individuals and small firms will have easier access to loans."

The current bankruptcy law is viewed as a nightmare by the business community. While bankruptcies in the European Union last no longer than two years, Czech bankruptcies take nine years on average. To make matters worse, creditor bankruptcy yields do not exceed more than one-fifth of liabilities.

The introduction of easy credit has forced more and more individuals and small businesses, unable to pay back their increasing debts, into the hands of distrainers — court-appointed repossessors.

"The amount of [property] executions has increased by one-fourth over one year," said the Distrainment Chamber's president, Juraj Podkonický. He added that the number of property executions this year is expected to rise to 200,000.

More recently, the Czech National Bank reported that about 8 percent of Czech households are having problems repaying loans. In early October, households owed banks 370 billion Kč ($14 billion).

Lengthy court proceedings work against both creditors and debtors, said Next Finance analyst Markéta Šichtařová. While creditors struggle for long periods of time to recover their money, they eventually get very little, and debtors are left in limbo and can't take out additional loans to cover shortfalls or continue operating their businesses, Šichtařová pointed out.

Personal bankruptcy protection will enable individuals and small entrepreneurs to write off their debts within five years, according to the new law. After a person declares personal bankruptcy, the court requires the debtor to put together a schedule of repayments and sell off assets to repay loans. The court permits debtors to retain a monthly living allowance of about 6,000 Kč per month.

At the end of five years, debtors return to their prebankruptcy status with a clean credit sheet — cleared of all debts, regardless of any outstanding balances.