Debt Counseling and Debt Restructuring
Debt counseling and debt restructuring: two terms you’ve probably heard before. You might even be dealing with a debtor who is entering such a process. But what exactly does that mean for you as a creditor? Does it mean you can kiss your money goodbye, or is there still hope of payment?
A letter from the municipality. What now?
Every natural person can ask their municipality for help in resolving debts. The municipality is obliged to provide assistance . This is called ‘debt counseling’, not to be confused with the legal debt restructuring scheme (WSNP). At the start of the process, the municipality maps out all debts and examines the debtor’s income (for example, from wages or benefits). Once the situation is clear, the municipality makes a payment proposal to all creditors. This takes into account a ‘protected income amount (VTLB)’ for the debtor: a person must have enough money left for basic needs — not all income can be used to pay creditors.
The payment proposal is usually a settlement proposal for final discharge, since there is not enough money available to pay all creditors in full. Therefore, a proportional amount is offered to ‘buy off’ the claims. Creditors are not obliged to agree to this.
The debt counseling process lasts 18 months. If all creditors have agreed and the debtor has complied with the arrangements with the municipality, all creditors are paid as agreed, and the debtor is debt-free after this period.
Forced agreement
It may happen that one or more creditors reject the municipality’s proposal while the rest agree. In such a case, the debtor can submit a request to the court to compel the refusing creditor(s) to agree. This is called a ‘forced agreement request’. The court will grant the request if the creditor could not reasonably have refused the proposal. For example, if the creditor refused purely on principle, without seriously considering the proposal. If the request is granted, the rest of the process continues as described above.
However, if the refusing creditor has a valid reason not to agree , the court will not compel them to consent. In that case, the debt counseling process fails. The debtor can then still apply for admission to the legal debt restructuring scheme.
If debt counseling fails: the step toward debt restructuring
A debt restructuring request is submitted to the court. To be admitted, several requirements must be met. One of these is that the debtor must have tried a debt counseling process, but it was unsuccessful.
If the debtor is admitted to the debt restructuring scheme, several (strict) obligations apply. For example, the debtor is required to work at least 36 hours per week or is subject to a job-seeking obligation.
A debt restructuring process also lasts 18 months. If the debtor complies with all the rules, the court grants a ‘clean slate’ at the end. This means that the available funds are distributed proportionally among all creditors, and the remaining claims can no longer be collected.
Maintain control over your claim
Is your debtor in a debt counseling or debt restructuring process? We are happy to help you gain insight into your options. Together, we’ll develop the best strategy to protect your claim as effectively as possible. Feel free to contact us!
