Applying for debt adjustment
Before applying for debt adjustment
Before you apply for debt adjustment, you need to find out whether you can resolve your debt problem in some other way. Debt adjustment is always the means of last resort to restructure debts.
In order for debt adjustment to be successful and for your finances to remain in balance, your life situation needs to be stable. You must be ready to change your consumer behaviour if necessary. Essential daily expenses and bills must be paid on time because during debt adjustment you must not become indebted again. As a rule, debt adjustment is allowed just once.
Debt adjustment includes all your debts and you cannot exclude any debt because, for example, you would like to pay it because of other parties to or guarantors of the debt. Debt adjustment is personal and, if granted to you, any other parties to or guarantors of the debt will have to pay some of the debt on your behalf.
Apply for debt adjustment to the district court in your municipality. Enclose with your application documents about everything, such as income, expenses, assets, debts and state of health, that you wish to be taken into account in your application. You must also always enclose a written statement relating to your indebtedness, i.e. your debt history. In your debt history, you explain how you have incurred your debts, how you intended to pay them and why you are unable to pay them. You can also enclose a proposed payment scheme with your application, but this is not mandatory.
Application forms are available on the oikeus.fi website, at district court registries or at legal aid offices. Financial and debt advisers can help you with your application.
Debt adjustment proceeds in the district court in stages.
The district court examines the application and, if necessary, sends a request for supplementary information. The district court forwards your application and debt history to at least the largest creditors and asks them for a statement on the granting of debt adjustment. All application documents are accessible by the interested parties' right of access to the matter, which means that the creditors, co-debtors, guarantors and providers of collateral have the right to obtain copies of the documents. If any of your creditors objects to debt adjustment, the district court will provide you with an opportunity to provide a written response.
The matter is normally dealt with in writing in the district court. Sometimes, however, the court needs to hold an oral hearing to which the applicant and creditors are invited
Once you have submitted an application to the district court, you are committed to the rules of debt adjustment. During the application process, you can spend money only on essential expenses and the payment of debts. You must maintain your ability to pay, which means that you must not unduly impair your earnings or increase your expenses. You must not, for example, resign from your job or move to a more expensive home.
If you are married, cohabiting or in a registered partnership, your spouse's financial situation will affect calculation of your available funds. Therefore your spouse may not unduly impair their income or increase their expenses, either.
Open and save all letters sent to you by creditors, debt collection agencies, enforcement and by the district court. These will be needed to map the debt situation.
Debt collection and any garnishment or seizure of income will continue as earlier for the time being. Wherever possible, you must also ensure that you do not incur new debt.
If the district court rejects your application for debt adjustment, proceedings in the matter end. You may appeal the decision of the district court to courts of higher instance.
The acceptance of an application or a decision to commence debt adjustment means that the proceedings continue.
After having received a positive decision, you must no longer pay anything other than interest on secured debts. Such payments include interest on home loans, when the dwelling is collateral for the loan, and interest payments on a car in your own use and bought under hire purchase agreement, when the car is collateral for the loan. You may also pay privileged child maintenance debt, i.e. child support payments that have fallen due during the past year.
Each month you must save the same amount of money as your calculated available funds if your debts are not subject to enforcement. You can see the calculated available funds in your application for debt adjustment. If you have no available funds, you do not need to save.
When your income is garnished, the money is not paid to the creditors, but remains in the possession of the enforcement office. If less money is garnished from your income than your available funds, you must save the difference. If, on the other hand, more money is garnished from your income than your available funds, the amount exceeding your available funds will be returned to you after confirmation of the payment scheme. The money saved before confirmation of the payment scheme is specified in the payment scheme.
Commencement of debt adjustment entitles you to give notice on fixed-term contracts, such as gym membership, to end within two months regardless of the terms of the contract.
After the commencement decision, it is important that you deal with payment of your running expenses on time. Non-payment will jeopardise the implementation of debt adjustment. If you incur new debts after commencing debt adjustment, they are not included in adjustment. You would have to pay new debt at the same time as debts included in the payment scheme and this would mean compromising on your everyday expenses.
You can enclose a proposed payment scheme with your application. Financial and debt advisers can help you to draft a payment scheme.
You can ask creditors to approve your proposed payment scheme in advance, in which case the court will confirm the payment scheme. If the creditors' approval has not been requested, the district court will request it from the creditors.
If you do not enclose your own proposed payment scheme with your application, the district court will generally appoint an administrator. The administrator will make a proposal for the payment scheme.
The administrator will draw up a payment scheme based on your application. The information in the application will be examined and you must notify the administrator of any information that has changed.
The administrator will ask the applicant, creditors and other parties for their statements on the proposed payment scheme. After this, the administrator will submit the proposed payment scheme to the district court for confirmation.
You will have to pay a fee for the proposed payment scheme drawn up by the administrator. This fee is at most the amount of your available funds for four months. Often the amount to be paid to the administrator is ordered to be paid out of the funds that you have saved since the start of debt adjustment or which have accrued to the possession of the enforcement authority. Payment of the administrator's fee extends the length of the payment scheme accordingly. If you have no available funds, you do not have to pay the administrator yourself as payment will be made out of public funds.
The district court will either confirm the payment scheme, or request that it be changed, in which case the administrator or the applicant must prepare it again. The court can still at this stage reject debt adjustment if factors have arisen that prevent debt adjustment from being granted.
When the district court gives a decision confirming the payment scheme, compliance with the payment scheme begins. At this point, any garnishment of income and distraint of assets ends. Debt counselling will help you to go through the payment scheme.
The decision about the payment scheme may be appealed to courts of higher instance in compliance with the instructions for appeal in the decision.
Application for debt adjustment will result in a payment default entry in your credit data file. The entry is erased from the credit data file once debt adjustment ends.
The payment scheme shows the applicant's income, expenses, assets, debts and the debt payment schedule.
You must comply with the confirmed payment scheme and its provisions in debt restructuring. You must not intentionally reduce your ability to pay during the payment scheme. In addition, in order to improve your ability to pay, you must undertake measures that may reasonably be required of you. This means, for example, applying for allowances to which you are entitled.
The payment scheme generally lasts three years. If you have no available funds, liability to pay is removed entirely from the payment scheme. In such cases, the payment scheme lasts for five years. Sometimes an impediment can exist to debt adjustment but adjustment has still been granted for weighty reasons. Also in these cases, the payment scheme lasts for five years. The scheme may also last significantly longer if it is possible for the debtor to retain their owner-occupied home.
If one of the creditors is a private individual, the court may, at the request of the creditor, extend the duration of the payment scheme for a maximum of two years after the payment scheme has ended other than with regard to secured debts.
The payment scheme applies to all debts that were incurred before the decision to commence debt adjustment.
If your ability to pay is reduced temporarily, you have a possibility to defer payments in accordance with the payment scheme for a sum corresponding to a maximum of five months' payments by notifying the creditor of the deferral. Creditors can be notified of the delay in payments informally.
In some cases, a payment scheme can be changed. If your ability to pay has been reduced long-term such that you could not reasonably be expected to meet the payment obligation specified in the payment scheme, you can apply to the district court for the payment scheme to be changed. Also, creditors may apply for a change in the payment scheme if their claim has not been included in the payment scheme.
A change may also be applied for if, during the payment scheme, factors have come to light that would have had a material effect on debt adjustment had they been known when the decision on debt adjustment was made.
An additional payment obligation means that you have to pay your creditors part of any increased income or funds you receive. The additional payment obligation applies to the period during which your payment scheme is valid and there are provisions concerning this in your payment schedule.
Your debt adjustment ends once you have made all the payments due under the payment scheme and any payments arising from an additional payment obligation. Creditors are paid an additional payment in accordance with the share of the disbursement confirmed in the payment scheme.