Currently, it is impossible for individuals to legally escape their debts in Switzerland, even when they have no chance of ever paying them back. Some find themselves trapped in debt for the rest of their lives. This week, the Federal Council unveiled a new legal procedure that will offer some heavily indebted people a second chance, reported RTS.
As an increasing number of people in Switzerland find themselves stuck in a debt trap, political pressure has mounted to find a solution. One study estimates that around 6% of the population have defaulted on a debt, which can be the beginning of a stressful downward spiral into a debt trap.
These people often live on welfare payments and suffer poor health, which adds to health care costs. Some also struggle to pay their taxes. Helping those trapped in debt to reboot their lives may have a positive impact on public finances as well as offering them a fresh start.
The new process will require the indebted individual to submit an acceptable budget that covers basic living expenses. Once accepted, any excess earnings will be used to pay down their debts over a period of three years, at which point the remaining outstanding debts will be written off.
This week, Beat Jans, the Federal Councillor in charge of the project, said that he estimates 2,000 to 10,000 people could benefit from the new rules every year. Jans also thinks the new system will benefit lenders. Those stuck in a debt trap cannot typically repay their debts. Under the new system there is a chance some of these lenders might at least get some money back.
More on this:
RTS article (in French) – Take a 5 minute French test now
For more stories like this on Switzerland follow us on Facebook and Twitter.