Debts often arise quickly, but those affected often bear the consequences for the rest of their lives. The Federal Council is now responding to two parliamentary initiatives and is planning a reform of debt collection and bankruptcy law. The aim is to introduce residual debt discharge – a model that has long been common practice in many neighboring countries. This would allow those affected to get rid of some of their debts permanently.
However, this is not yet possible under current law. Anyone who files for personal bankruptcy cannot get rid of their debts. Creditors receive a certificate of loss for the uncovered part of their claims. Debtors have to make do with the minimum subsistence level and can be pursued again as soon as they have assets again. Personal bankruptcy provides the debtor with a kind of respite.
This constant pressure can lead to health problems and health costs. And who is motivated to earn more or regain a professional foothold if everything is taken away from them?
The Federal Council is proposing two new restructuring procedures to Parliament.
Simplified debt restructuring procedure: Debtors with a regular income can have part of their debts discharged by means of a composition, provided the majority of creditors and the court agree. The settlement is also binding for creditors who do not agree.
Bankruptcy reorganization proceedings: In the event of hopeless over-indebtedness, debtors must surrender their entire disposable income to creditors for three years and provide evidence of regular income-generating efforts. Once these obligations have been met in full, any remaining debts are discharged.
Fines and maintenance payments, among other things, are exempt from residual debt discharge.
Once you have been discharged from your debts, you cannot apply for a new discharge of residual debt for the next ten years. In addition, if someone suddenly acquires assets, i.e. wins the lottery or inherits them, these assets can be used to settle the debts for up to five years after the debt has been reduced.
It is not yet clear when parliament will decide on the new residual debt discharge.
If you have any further concerns or questions regarding debts, our lawyers are at your disposal.