People who are over-indebted will be offered a new chance to live debt-free. The Federal Council unveiled new sanitation procedures on Wednesday, accompanied by strict conditions.
People who fail to repay their debts themselves today have little chance of living debt-free again, according to the Federal Council. They often only have the subsistence minimum. This situation weighs on their health and their loved ones.
Society and the economy also lose. Over-indebtedness causes costs for social insurance and the health system, not to mention that the people concerned often find themselves unable to pay their taxes. According to a study, around 6% of the population is affected by at least one act of property default in Switzerland.
In order to fill a gap, two new procedures are proposed. A simplified debt restructuring procedure will allow people who are over-indebted but have a regular income to get out of it.
The debtor may conclude an agreement providing for the forgiveness of part of his debts, on the condition that the majority of his creditors approve this agreement, and that a judge validates it. The agreement will then be binding on all creditors, even those who have not signed up to it.
Bankruptcy route
For over-indebted people who have no chance of finding such an agreement, a restructuring procedure through bankruptcy will be possible. The debtor must, for three years, remit all funds or property at his disposal and in excess of the subsistence minimum to his creditors. He will also have to prove that he is making efforts to earn regular income.
The debtor who has respected these commitments throughout the procedure will be released from the rest of his debts. The cantons will have to ensure that people in debt have access to advisory services on the new procedures.
Speaking to the media in Bern, the federal councilor in charge of the case Beat Jans estimated that between 2,000 and 10,000 people could use the new procedures each year.
Avoid abuse
Safeguards are still provided to avoid abuse and excessively high losses among creditors. After discharge of the balance of debts, it will no longer be possible to undergo the procedure again for a period of ten years.
In addition, if a debtor benefits from exceptional income during a certain period following the procedure, in the form of inheritance or donation for example, they must be distributed to creditors. This provision was added following the consultation, during which the creditors’ lobby was critical. Debtor monitoring will also be set up.
ats/ebz
Swiss
