Debt relief

Debt relief, under which debt is paid down according to a repayment schedule or the insolvency estate is realised, offers individuals the prospect of exemption from further payment.

Debt relief is a way of handling insolvency or impending insolvency for debtors who are individuals (whether or not they engage in business) or legal entities that are not businesses. This insolvency method is more sympathetic to social considerations than economic aspects. The aim is to give debtors a ‘fresh start’ and motivate them to participate actively in the redemption of their debt. Debtors are generally required at least to be able to cover the costs of the proceedings and ongoing maintenance obligations. Certain categories of debtors (old-age or disabled pensioners, young adults, and debtors able to repay a prescribed percentage to creditors) may have their debt discharged over a shorter period. It is assumed that secured creditors’ claims will be satisfied from collateral security. A parallel aim here is to reduce public budget spending on the rehabilitation of those who find themselves in social crisis.

Debt can be discharged by realising the insolvency estate, by repayment scheduling, or by a combination of the two (in fact, the wording of the Insolvency Act that is currently in effect prefers the employment of a combination of debt relief methods).

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