Debt settlement

The Debt Settlement Act gives individuals with serious debt problems the opportunity to gain control of their economy. A debt settlement scheme is an agreement to pay as much as possible of the debt during a limited period, and then have the remaining debt cancelled.

The scheme covers all types of debt, including to the public authorities, and can as a general rule only be used once in a person's lifetime.

Procedure for anyone applying for debt settlement – the right to assistance

A person wishing to apply for debt settlement must go to the local enforcement commissioner; the district police authority or the enforcement bailiff. The enforcement commissioner will give advice and guidance relating to the Act and will assist in filling in the application form. If debt settlement negotiations are opened, the enforcement commissioner will help to formulate a payment plan which will be presented to creditors for their assessment. If the proposal is not accepted, a settlement plan can be set by the courts. Some enforcement commissioners also offer assistance in the financial transactions of a debt settlement plan. It normally takes four to six months to put together a debt settlement plan, then followed by a payment plan (debt settlement period) of five years.

Who can come under the Debt Settlement Act?

The main requirement for coming under the Debt Settlement Scheme is permanent inability to meet liabilities. This means that the problems must be of a permanent nature, and that it is impossible to pay the debt within the foreseeable future. Another main requirement is that a debt settlement plan must not appear to be unreasonable or offensive to others. In most cases debtors are also required to make an attempt to clear up the problems on their own to the best of their ability.

The right to retain a dwelling and other assets under a debt settlement plan

A person who is able to make a debt settlement plan will as a general rule have the right to retain an owned dwelling of reasonable size and standard. Only the part of the housing loan debt that is above the appraised value of the dwelling will be cancelled under the debt settlement plan. The idea is that the housing loan debt will correspond approximately to the value of the house at the end of the debt settlement. The Act also allows the debtor to keep a car in some cases. It must then be of reasonable value, and necessary due to the work situation or a disability.

Money for personal subsistence during the debt settlement

Pursuant to the Debt Settlement Act, persons who are granted debt settlement has the right to keep a reasonable amount of income for their own subsistence. In addition to coverage of reasonable housing expenses, funds may be assigned to necessary consumption costs, or subsistence in accordance with the guideline rates. This amount currently corresponds to 85 per cent of the minimum pension in 2010, but the rules are being revised. Money can also be set aside for providing for children.

Need help with financial problems?

Any person experiencing financial problems may seek assistance from a financial advisor in the home municipality or call NAV's telephone for financial advice 55 55 33 39 (800GJELD) which is a free nationwide assistance telephone. Private individuals with serious debt problems can also apply to the enforcement commissioner for debt settlement negotiations pursuant to the Debt Settlement Act.