The Ministry of Justice said Estonia's insolvency system is not sustainable in its current form. As a result, problems must be addressed to prevent the entire system from collapsing. 

A bankruptcy trustee is an impartial official appointed by a court whose main task is to manage and carry out bankruptcy proceedings. The trustee acts as an intermediary who must protect the legal interests of both the debtor and creditors and ensure transparency. 

One way to make the insolvency system more sustainable, the ministry said, would be to cover trustee fees from the state budget in cases where there is no property or only minimal assets. 

Right now trustees cannot declare bankruptcy if it is clear there is no property. "No one pays the trustee from the state budget or from creditors' pockets when there are no assets. If a deposit is paid, bankruptcy is declared, but if it is not paid, then it is not declared because there simply is no property," said Andres Hermet from Estonian Chamber of Enforcement Agents and Trustees in Bankruptcy

The ministry said trustees should not have to perform mandatory work for an unknown period without any guarantee of reasonable compensation. If the state paid reasonable compensation, the ministry said the quality of bankruptcy proceedings could improve. 

The ministry did not specify how much the possible solution would cost the state. It noted that the budget impact could be significant. 

Hermet said such additional state funding is a good idea, because no one would refuse money if the state wants to invest in the field. 

But he did not agree with the ministry's assessment that the insolvency system is collapsing. He said new recruits are needed because entering the profession is difficult for people who have never been trustees, and trustee fees are completely unpredictable. 

The Ministry of Justice said that if civil servants handled bankruptcy proceedings, it would mean additional costs for the state budget. Under this solution, civil servants would need salaries, and there would be IT development, space and support service costs, training costs and transition costs. The ministry said the state's workload would increase significantly. 

Insolvency Service head Signe Viimsalu said creating such a state competence center would be the most reasonable option. 

Viimsalu wrote to Prime Minister Kristen Michal last week, saying that widespread insolvency could cause economic, social and institutional uncertainty and pose a threat to Estonia's internal security. 

Viimsalu said the system that has been in place for the past 30 years urgently needs reform so creditors can recover their money more effectively. She said it would be an additional cost for the state budget, but in the long run it would be the most reasonable and cost‑effective solution for society as a whole. 

She also could not say how much it would cost the state to nationalize the current trustee system. "I think the ministries need to calculate that themselves," Viimsalu said. 

The Insolvency Service head said there are several ways to fund a new type of system. 

"Certain proceedings could be handled entirely by the Chamber of Commerce and Industry's arbitration court. One option is to create an insolvency tax in Estonia to fund the system. Another option is a middle ground where, for example, wrongdoers pay part of the system's costs. Another option is that the bankruptcy estate itself funds part of the system, such as the IT system," Viimsalu said.

Viimsalu said the idea of an insolvency tax still needs more thought. 

Hermet from the trustees' chamber said any proposal to create state bankruptcy trustees is not adequate. 

"I do not see any economic logic in this. The issue where I have no criticism of the service is that we are fighting against bankruptcy masters and late bankruptcy filings. But a state trustee would not help solve this problem in any way."

He added that he does not see how a civil servant could work more effectively or cheaply than a bankruptcy trustee.

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