The last way out of debt – Debt settlement – Debt Consolidation

Good Finance is the authority in Sweden that works with debt. Good Finance sends cases that have not been cleared by the collection company. Debt collection companies are usually the companies that handle payment reminders. These are private companies and are not involved in the state in any way. When the case is sent to Good Finance you will receive a payment note. In some cases, you can be granted a quick loan with payment notes, but this is something that should only be used in absolute emergency.

Debt settlement can thus serve as a last resort for private individuals and entrepreneurs who do not see any opportunity to repay their debts. These may be private individuals who have a very large debt burden and very little ability to pay or individual traders who have been in significant financial difficulties due to entrepreneurship.

What is debt relief?

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Debt settlement can be seen as a last resort for a severely indebted person. The Crown Magistrate is the authority that can decide whether or not a person can receive debt relief. Debt settlement is not a type of support or financial assistance. Instead, debt relief is a way to simply cut your debts gradually and over a longer period. In addition, some of your debts are written off entirely.

It is up to the indebted person to apply for debt relief themselves. There are two types of debt restructuring. First, normal debt restructuring for you as a private person and partly debt restructuring for entrepreneurs. You apply for one of these forms at Good Finance via their website or by filling in the form for debt relief and submitting it to them. Information on how to apply can be found here.

What does debt restructuring mean in practice?

What does debt restructuring mean in practice?

If an application for debt restructuring has been submitted to Good Finance, Good Finance will review your situation and will return to you with an initial, preliminary decision on whether or not to be granted debt restructuring. Note, however, that this is precisely preliminary, so it is not a definitive decision and it may change. The reason for this being precisely preliminary is that, after the decision has been made, the Good Finance makes contact with the creditors concerned, ie the persons who have one or more claims (debts) on the debtor. The Crown Magistrate gives the creditors a proposal on how much the debt should be reduced in terms of the debtor’s personal and financial circumstances. However, this proposal is not open to negotiation to any great extent. Should a creditor refuse the proposed debt settlement, the Crown Magistrate can still push through it. However, the creditor is given the opportunity to appeal the proposed decision to the district court. After the Good Finance has made the decision, the debtor receives a final decision and the debt settlement can be initiated.

Should the debtor be denied your debt restructuring application, he / she has the opportunity to appeal the decision to the court of first instance, ie to the district court. In connection with the rejection, the debtor will also receive a motivation from the Crown Magistrate as to why he is denied debt restructuring and information on when he / she may be able to apply for debt restructuring in the future. If the debtor is granted debt settlement, the process will start shortly. Depending on the personal and financial circumstances, the extent of debt restructuring may vary in degree. Generally, debts are written off to some extent. Of the portion that remains after the amortization, a payment plan is drawn up. Normally, the payment plan extends over five years. While the debts are being paid off, the indebted person will be allowed to retain a sufficiently large portion of his financial resources to at least live on a minimum of subsistence, which is currently SEK 4814. The remaining part will go towards paying off debts. After these five years, you should then be debt free and the debt restructuring is thus completed.

It is worth noting, however, that only the debts that existed when deciding on debt restructuring were also included in the remediation. The installment does not include liabilities that arise thereafter. Should the debtor incur debts arising after a decision on debt restructuring was made, the debtor must therefore pay off these debts with the money he must keep in order to live on the minimum living. Since this amount is incredibly low, there is virtually no scope for the debtor to spend money on anything other than the absolute most necessary.

Who can apply?

Anyone has the opportunity to apply for debt relief. However, this is far from being granted by everyone. In order for your debt relief application to be granted, you must have an extremely strained economy. Therefore, having debts of the larger kind and a limited ability to pay via salary income, grants, etc., are not sufficient reasons for being granted debt restructuring. In order for an application to be granted, it is necessary that the situation is precarious and that the applicant can be considered a lifetime debtor, that is, a person who has no real opportunity to ever be debt free.

In the Debt Settlement Act, this is expressed as follows (§ 7 Debt Settlement Act (2016: 675)).

Debt settlement may be granted if the debtor cannot legally pay his debts and this inability in all circumstances can be presumed to exist for a reasonable period (qualified insolvency).

Another prop that must be fulfilled is that the debtor must be a Swedish citizen and otherwise have most of his “main interests” in Sweden. By this means, for example, that the applicant must have income in the country or own a home on Swedish land.

There is also a third prop and it is about fairness. The Crown Magistrate is to assess how the applicant has come to be in the present situation and what he or she has done to arrange the precarious situation. In practice, the Crown Magistrate wants to see that at least some of the debts have arisen from events wholly or partly outside the debtor’s control and that the debtor shows a genuine willingness to undergo the debt restructuring process.

If a person satisfies the aforementioned props, then debt restructuring may become relevant. However, as you understand, there is a lot to do for a situation to be considered as extreme and serious for a debtor to be granted debt restructuring. In other words, there is no self-purpose to strive for debt restructuring, but it should be seen as a last resort. Instead of focusing on debt relief, there is actually other help you can get if you are in a difficult situation.

Financial aid

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If you are in financial trouble, but not in such a serious situation that you are granted debt relief, there are other alternatives to help. For example, one approach may be to apply for financial assistance. Applying for financial assistance can be a wise way to prevent their precarious financial situation from worsening. Just as we wrote above in the text, debt restructuring is something that should be avoided as far as possible. It is therefore a good idea to try to save your finances before debt settlement comes up.

Financial assistance can encompass several different things. You apply for financial assistance from the National Board of Health and Welfare, which is the responsible authority for this. The chancellor is thus not involved in this type of financial aid. Financial assistance is divided into two parts. On the one hand, it is livelihood support and on the other, it is assistance for life management in general.

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