Debt counseling in The Netherlands

Debt counseling in The Netherlands Albert Luten November 26, 2010

National Institute forBudgetinformation • Consumers information • Website • Leaflets, software • Call center • Press • Professionals • Courses • Software

Debt regulation • Amicable debt settlement • Social banks • Social services • Others, .. • Legal debt settlement • Court • Since 1999 > After three years a fresh start

Repayment capacity • Early nineties: 3 methods • Detailed budget method • Global budget method • ‘Legal method’ > Unification was needed!

1999 Legal phase • All courts used the legal method • But many differences in interpretation • Sometimes large differences in outcomes

Recofa Commission • Develop one method / interpretation of the legal method • Simply: it must work for 95% of the cases • Develop software • Maintain the method

Law art. 475 d • Not seizable income: • 90% of the social minimum • Correction for rent • Correction for health insurance premium • Plus a ‘nominal amount’

Social minimum • In The Netherlands we have one social minimum: • 1300 euro per month for a couple. • 90% for lone parents • 70% for singles • Else: you have to make one: • Focusgroups (FBU, Un. of York) • Reference budgets • Other method: budget method

Rent correction Rent 700 Rent in social minimum 220 – Rent subsidy 350 – Correction for rent: 130 - with a maximum - service costs: partly

Housing costs • High rent: move or an extra (temporary) correction • Own house: sell it or same correction as rented house • Boarding money, children with an income

Correction health insurance Total premium 200 In social minimum 45 - Healthsubsidy 120 - Correction 35 Own risk: payed from the estate when used

Legal part Total net income 1500 90% social minimum 1170 Corr. rent 130 Corr. health ins. 35 Total corrections > 1335 Repayment capacity 165

Nominal part • The judge is free to decide upon this • The commission made rules for this part, so everybody is treated ‘equal’ • Specific points: individual solution

Corrections nominal part • All costs that cannot be paid by the social minimum plus legal corrections: - Corrections for subsidies - Corrections for income earning costs - Other costs

Corrections for subsidies Households with a minimum income have higher subsidies: correction for households in debt advice that are also on a minimum level, but with a higher taxable income Child allowance: say 120 at minimum, 80 with income 1500 Correction: 40

Corrections income earning costs • Standard 5% for people with work (stimulus) • Travel costs • Costs of childcare • Car: depends • Study costs: depends

Other costs • Costs of a handicap • To visit a hospital • ... Not: • Donations to f.e. church • Transfers abroad

Nominal part • 5% extra for workers • Extra rent costs • Car • Childcare • Child allowance • Study costs • Alimony • Handicap • Other

Income • Only incomes that can be attached: wages, social benefits, tips, pensions, et cetera • Not: child allowance, subsidies, orphan benefit

E N D • www.nibud.nl • European Consumer Debt Network: ECDN http://www.asb-gmbh.at/ecdn/index.php www.referencebudgets.eu

Debt counseling in The Netherlands