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Debt Management in Holland

Statistics Netherlands recently reported that around 600 000 Dutch households were struggling to repay their debt. Around 100 000 were receiving some sort of debt assistance.

Debt Relief Laws

In the Netherlands, the WSNP (Wet Schuldsanering Natuurlijke Personen, or Debt Restructuring for Natural Persons Act) plays a central role in providing a formal debt relief process.

The law was established to help individuals facing significant financial difficulties by offering them an opportunity to legally discharge their debts after a period of repayment.

As of 2023, all municipalities in the Netherlands are required by law to offer debt counselling services to individuals in financial distress. Municipal debt counselling (focus on the budgeting and counselling) is the first step for many people, and it ensures that everyone has access to guidance, no matter their income level.

These services help consumers explore debt management options and offer essential advice on budgeting and improving financial habits.

Training and Qualification of Debt Counsellors

Debt counsellors in the Netherlands must meet certain qualifications to provide proper assistance.

They often have extensive training and may be certified by organizations such as the Dutch Association for Public Credit (NVVK).

The NVVK ensures that its members adhere to a code of conduct and offers training programs to maintain high standards of debt counselling. Counsellors may have backgrounds in law, finance, or social services, and must demonstrate knowledge of debt restructuring and related legal processes.

The NVVK also accredits organizations that provide debt counselling services, ensuring that these organizations operate with professionalism and integrity.

Debt Management Options

There are several options available to people experiencing financial distress in the Netherlands:

    1. Sequestration or Bankruptcy: Individuals can opt for sequestration (which is similar to bankruptcy), if they are totally unable to repay their debts. This process involves the liquidation of assets to settle outstanding liabilities. Sequestration is typically considered a last resort and can have long-term consequences on an individual’s credit.
    2. Temporary Suspension of Payments: Before proceeding to the WSNP, individuals may request a temporary suspension of payments. This is granted by the courts for a period of 18 months, during which the individual’s debts are frozen while they attempt to resolve their financial issues. During this period, an administrator is appointed to manage the process and keep an eye on their spending, and a court hearing is held within a few months to determine whether the individual qualifies for full debt restructuring or if bankruptcy will be declared.
    3. Debt Restructuring (WSNP): For many individuals, the WSNP process is the most common method of dealing with unmanageable debt. The WSNP allows individuals to restructure their debts and enter a repayment plan with their creditors. After a certain period, often 36 months in the past, individuals may have their debts (excluding secured debts like mortgages) written off. Since July 2023, this process has typically been shortened to 18 months (but the court decides).

The WSNP Process

Once a person enters the formal WSNP process, they are granted a reprieve from their creditors, and a court-appointed administrator manages the repayment process.

Only unsecured debts, such as credit cards, personal loans, and unpaid bills, are typically included in the WSNP.

Secured debts, like home mortgages or car loans, cannot be discharged through this process but will be factored in to budgets etc.

The administrator ensures that the individual complies with the terms of the debt restructuring plan, which includes monthly payments toward the unsecured debts.

After the set term is completed, if the individual has adhered to the agreement, any remaining unsecured debt is officially forgiven, and the individual receives a clearance certificate, offering them a fresh start: a “clean slate.”

Costs and the Impact on Credit Reports

The costs associated with the WSNP are relatively low.

Many debt counselling services in the Netherlands, including those associated with WSNP, are non-profit organizations, meaning that the fees are minimal, and the process is designed to be accessible to individuals regardless of their financial situation.

Interestingly, the WSNP process is visible and will remain visible on the individual’s credit report during the duration of the restructuring process and for up to 5 years after completion. This can affect future credit applications, as lenders may see the WSNP on the report. Those applying for new credit during or immediately after the WSNP process may face higher interest rates or less favourable terms, as lenders consider the risk of lending to individuals with a history of debt restructuring.

Options & Solutions

Debt management in the Netherlands offers several structured options for individuals to regain control of their finances, with the WSNP being a key process in providing relief for those with unmanageable debt. While the process can have lasting effects on an individual’s credit report, it offers a total fresh start once completed.