This article will explain the meaning of collective debt settlement. The goal? Ensuring that you can pay off your debts and still live humanely while paying them off. Let’s get started!
What is collective debt settlement? 🔎
Collective debt settlement is a legal procedure that aims to ensure, to the extent possible, that you can pay off your debts and that you can still live in dignity during repayment. After collective debt settlement, you can in principle go back to living debt-free.
Advantages and disadvantages of collective debt settlement
| ✅ Advantages | ❌ Disadvantages |
| Being debt-free afterwards | Loss of privacy |
| Stopping interest calculation on debts. | Long duration of settlement, up to seven years. |
| Protection against amicable* or judicial** recoveries | Costs associated with the debt mediator that can add up significantly |
| Possibility of access to a pro bono lawyer*** for those who qualify. | Possibility of imposed conditions, such as searching for work or moving to cheaper accommodation. |
| Simplified handling of all debts in one plan without individual negotiations with each creditor. | Loss of control over own income, with only living expenses available and required approval for major expenses. |
Every procedure has its pros and cons, and collective debt settlement is no exception. So be careful when considering this option and make sure you have weighed all the pros and cons before making a decision. ⚖️
Application and admission to collective debt settlement 📫
Applying for collective debt settlement is not as difficult as it sounds. You have to file a petition with the labour court. However, there are some conditions you need to meet to be admitted to a collective debt settlement.
The role of the debt mediator 🤝
If you are admitted to a collective debt settlement, the judge will appoint a debt mediator. This independent party will initially try to reach an amicable settlement, in other words a repayment plan. If this is not successful, the judge may impose a court settlement or total debt cancellation.
Tip!
Be sure to view our blog article on the importance of a debt mediator for the self-employed.
Living expenses during collective debt settlement 💶🛒
From the moment you are admitted to a collective debt settlement, you will no longer receive your income on your own. As far as possible, the debt mediator will take care of paying off the debts and will give you part of your income to pay for daily needs: this is called living allowance . 🍽️
Review and revocation of collective debt settlement 🔄
Major changes may require that the current collection arrangement (repayment plan) be updated. This is called a revision. If you do not abide by the agreements made in a collective debt arrangement, the collective debt arrangement may be terminated. This is a revocation of the collective debt arrangement.
Collective debt settlement and the labour court 🏛️
The labour court plays a crucial role in the collective debt settlement process:
- It is where you file your application ✍️
- Labour court judge decides on your admission from the proceedings 👩⚖️
- Appointment of debt mediator is made by this body 🤝
- Deciding on amicable and judicial settlement arrangements 🧾
End of collective debt settlement 🏁
The ultimate goal of the collective debt settlement is that you become debt-free. This means that you have paid off all your debts or obtained total debt cancellation. Once this goal is achieved, collective debt settlement is terminated.
Is collective debt settlement the right choice for you? 💡
Collective debt settlement can be a good solution if you are facing large structural debts that you cannot pay back within a reasonable term. However, it is a big decision with both positive and negative consequences. It is therefore important to think well and seek professional advice, if necessary, before taking this step.
Are you thinking about quitting your sole proprietors?
Then view our blog article on how a cessation works.
