Debt reconstruction

Debt reconstruction – a way to get your finances in orderThis is how we normally explain debt reconstruction – a way for people who are heavily indebted to get their finances in order. Our intention is for this brochure to provide you with answers to the most frequently asked questions about debt reconstruction. Because we know- that there can be a lot of questions.

The Swedish Enforcement Authority is the place you turn to in order to apply for debt reconstruction. In this brochure, we describe what debt reconstruction is, how it works and what you need to think about. You can also find more information on our website.

What is debt reconstruction?Many people wonder what debt reconstruction actu-ally involves. The basic point of debt reconstruction is that you pay off some of your debts over the course of several years. You don’t have to pay the rest. When the debt reconstruction is complete, you no longer have the debts that were restructured – the idea is that you will be debt-free.

An entirely new law concerning debt reconstruc-

tion came into force on 1 November 2016 – debt reconstruction for entrepreneurs. This means that there are now two types of debt reconstruction: one that we call normal debt reconstruction and one for entrepreneurs.

Those who are – or have been – involved in a busi-ness may have the possibility of applying for normal debt reconstruction or debt reconstruction for entre-preneurs. This also applies to those who are closely related to an entrepreneur. You can decide yourself which of the two suits you best.

The first part of the brochure deals with normal debt reconstruction and the second part covers debt reconstruction for entrepreneurs. At the end of the brochure, you can read about records for payment default and where you can find more information about debt reconstruction.

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Normal debt reconstructionWho is eligible for normal debt re-construction? For us to tell you if you are eligible for debt recon-struction, we need to go through your application and you need to fulfil a number of conditions:

• You are so indebted that you are in no way able to pay your debts for many years.

• The debt reconstruction is reasonable with regard to your personal and financial circumstances.

• Your principal interests are in Sweden, for ex-ample because this is where you live or -where your debts are.

• If you are self-employed, the finances of the busi-ness must be simple to investigate. Bear in mind that you may also have the opportunity to apply for debt reconstruction for entrepreneurs.

• You can not have a current trading prohibition(legally not allowed to run your own business).

Even if you already have had a previous debt re-construction, it may still be possible for you to get another one, for example if you have incurred new debts or the previous debt reconstruction was unsuccessful. But you need to have specific grounds to get debt reconstruction again. Otherwise, there is no fixed answer to the question of who can –get debt reconstruction.

You can read more about what we do when we process your application a little further on in the brochure.

How to apply You apply for debt reconstruction by filling in the form “Ansökan om skuldsanering” (in Swedish only). The form is available on our website. The website also tells you where to send the application. You can also apply online via our website.

Help is availableYou can apply yourself or contact a budget and debt advisor in your municipality to get help. You can learn about budget and debt advice at konsumentver-ket.se and search for a local budget and debt advisor at hallåkonsument.se. You can also call our customer service department.

Suggestions to simplify the processYour application has to contain a list of the debts you know about and to whom you are in debt. You also have to estimate the size of your debts. This section contains suggestions that may help you remember what debts you have:

1. Get your latest income tax return. This lists some of your debts.

2. Go through any demand letters you have saved from recent years.

3. Include foreign debts and debts to relatives, friends and acquaintances. Debts of this kind are also -covered by debt reconstruction and therefore need to be included in your application.

You can also contact our customer service depart-ment to obtain a statement from our register. On this you can see all the debts that have been – handed in to us, but please bear in mind that we do not have

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all of your debts. Consequently, you can also contact a credit reference agency in order to see if they have more information about your debts.

What to bear in mind once you have submitted your applicationIt can take a few months to decide if you will be given debt reconstruction. During this period, it is im-portant that you do not take on new debts. Also bear in mind that you have to pay your normal expenses, for example rent, electricity and telephone bills, tele-vision licence fee and any maintenance for children.

If your salary or income is subject to attachment, it will continue until we have made a decision to initiate debt reconstruction. You can find out more about what this decision involves a little further on in the brochure.

We assess your applicationWhen we receive your application, we check whether you fulfil the conditions for debt reconstruction. Two of the conditions require a little more extensive investigation than the others. This applies partly to your debts and your prospects of repaying them, partly to whether debt reconstruction is reasonable. You can read more about these two conditions below.

Your debts and your prospects of repaying them We first look at your prospects of repaying your debts in the future. -This means we go through all the circumstances that may affect your ability to pay. There is no limit to how small or large the debt needs

to be. Instead we look at your total debt in relation to what you are able to pay.

Your ability to pay is affected by many different fac-tors, including

• the size of your debt

• your current and future income

• your age

• your capacity to work and level of education

• any illness and unemployment.

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Are your personal and financial circumstances reasonable?In order for us to decide whether debt reconstruction is reasonable, we make a comprehensive assessment of your personal and financial circumstances. We call this a reasonability assessment. We look at your entire situation and three areas in particular:

• how and why your debts have come about

• that you have done what you can to repay your debts

• that you are active, for example that you answer the questions we ask in order to assess your appli-cation.

We initiateIf you fulfil the conditions, we decide to initiate debt reconstruction. This is a preliminary decision and means that you have the prerequisites to obtain debt reconstruction. In this decision, we also –tell you how much you have to pay each month. In order to get the debt reconstruction process started as quickly as possible, you have to start making payments to us at this time.

How much you have to pay depends on how much you can pay. To decide this, we calculate how much you and any family members need to support yourselves. This decision is also preliminary and we can change it while your case is being processed. At this stage, we do not have all the information about

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your financial situation and we therefore need to be somewhat careful when deciding how much you have to pay. It is only at the next stage that weinvestigate more thouroughly. At this stage we may get more information and decide that you have to pay more or less.If you already live on the subsistence minimum when the debt reconstruction process begins, you can get debt reconstruction without paying. In this case you do not repay any of your debts.

We announce the decision to intiatie debt recon-struction by publishing the decision in The Official Swedish Gazette (Post- och Inrikes Tidningar). We also inform the creditors (the people you owe money to) that we are aware of. The creditors are then to notify us of your debts. They can also notify us of any debts you have not included in your application.

A debt reconstruction process includes all the debts that you have when we decide to initiate debt reconstruction. However, debts that arise after the decision are not included and you need to repay these in full.

The decision to initiate debt reconstruction means that any attachment of your income ends.

We draw up a proposalAt this stage we complete our investigation of your application. Together with you, we draw up a propo-sal for how the debt reconstruction is to take place. This proposal states which debts are included in the debt reconstruction, exactly how much you have to pay and for how long you have to pay. There are two months that are payment-free – June and December.

In these months you don’t pay at all. The idea is to give you breathing space in your debt reconstruction.

It is normal to pay over a period of five years, but if you have good reasons we may decide that you have to pay for a shorter period. If you have made your payments as you are supposed to since we initiated your debt reconstruction, we of course deduct these months. Once you have approved the proposal, we sendit to all of your creditors.

We decideWhen your creditors have had the opportunity to tell us what they think, we decide whether or not you are to be given debt reconstruction. We can decide to grant you debt reconstruction even if some of your creditors do not agree to it. They then have the opp-ortunity to lodge an appeal with the district court. It is no longer possible to appeal the decision (it has gained legal force) three weeks from the date on which we or the district court made the decision.

When you have received the decision on debt re-construction, you continue to pay us once a month. Once a year, we pay out the money to your creditors. We also then charge you a fee of SEK 500 which we deduct from the sum you have payed to us.

If you do not pay as you are supposed to, you will receive a reminder from us. In which case, we also inform your creditors that you have not paid.

Remember that you have to pay even if someone ap-peals the decision. However, if you do not have to pay anything at all, all your debts are written off –when your debt reconstruction is complete.

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If you do not fulfil the conditionsIf we assess that you do not fulfil the conditions for debt reconstruction, we deny your application and state the reasons why. This can take place both before and after we initiate debt reconstruction. If we have initiated your application and you have paid us, we give you back the money you have paid in. If your salary was subject to attachment prior to the initia-tion, the money goes instead to the creditors inclu-ded in the attachment.

You have the opportunity to appeal our decision. In which case, a court reviews your case.

Even if your application is -denied, you can reapply for debt reconstruction. Our reasons for rejecting your application can provide you with guidance as to whether it is appropriate to apply again.

If your financial circumstances chan-ge during the debt reconstruction Both you and your creditors can apply to have the debt reconstruction changed. We call this reassessing the debt reconstruction.

If your financial circumstances deteriorateyou may no longer be able to pay what you are supposed to. In which case, you can apply to have the debt recon-struction changed by us so that you pay less.

If your financial circumstances improve a lot, your creditors may want to have more or you might want to pay more. If it is your creditors who apply for a

change, we can extend the repayment period. Howe-ver, we do not do this you are the one to ask for the change.

Your creditors can also apply for us to cancel your debt reconstruction, for example if you aren’t paying what you should be. In which case, your debts remain the same as they were prior to the debt reconstruc-tion, minus what you have already paid.

It is important that you do not get new debts, even if you have temporary repayment problems. Be parti-cularly attentive if you have requested a tax adjust-ment, applied for housing allowance or are liable for maintenance payments. The fact is that you do not have the right to change your debt reconstruction as a result of new debts – we can enforce these as with any other debts.

Following the debt recon-structionYour debt reconstruction is complete five years after the date when we decided to initiate the debt recon-struction. This also applies to those who have been given a shorter plan or no repayment plan. If you have to pay for longer than five years, the debt recon-struction is complete on the day you make the final repayment. The idea is that you will be debt-free once your debt reconstruction is complete.

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Debt reconstruction for entrepreneursDebt reconstruction for entrepreneurs has approx-imately the same format as normal debt reconstruc-tion, but there are some differences. On the one hand, you repay your debts over a shorter period; it is always three years. On the other hand, the conditions for obtaining debt reconstruction for entrepreneurs are somewhat stricter, for example the business needs to be run in a serious manner.

The idea behind this law is that people should be less hesitant to start businesses. If it doesn’t work out, they should be able to quickly get debt recon-struction in order to get their finances in order and perhaps start a new business. Accordingly, it is the individual’s finances that are reconstructed, not those of the business.

Who can obtain debt reconstruction for entrepreneurs?You can obtain debt reconstruction for entrepreneurs if you are – or have been – involved in a business. What we mean by ‘involved’ is a person who is either

• self-employed or represents a legal entity, for ex-ample a limited company or a partnership

• has previously been self-employed or has previous-ly represented a legal entity.

The term representative includes, for example, the head of the business, the owner, the board of direc-tors and the managing director. In addition, people closely related to the two groups here can also obtain debt reconstruction for entrepreneurs. The term

close relatives includes spouses, cohabitees, parents, siblings, children and the children or a spouse or cohabitee.

What are the conditions?The conditions that you need to fulfil are dependent on the way in which you are – or have been – involved in the business. There are three different categories:

• People who are currently involved in a business: The business has to be going well and your debts must not have been caused by this particular business.

• People who have been involved in a business pre-viously: Seventy per cent of your debts are to have come from the business.

• People who are closely related to someone who is – or has been – involved in a business: Seventy per cent of your debts are to have come from the entrepreneur’s business.

You also need to fulfil further conditions. These apply regardless of the category to which you belong:

• You are so indebted that you are in no way able to pay your debts for many years. As an entrepre-neur, it is common for your future income to be uncertain, but we still make an estimate of your ability to pay. For example, we look at your quali-fications, the salary situation in your industry and your own assessment of your future income.

• Debt reconstruction has to be reasonable in rela-tion to your personal and financial circumstances. We conduct roughly the same assessment as for normal debt reconstruction, but we also have to assess the way that debt reconstruction would in-crease your chances of running another business.

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• The business has to be run – or have been run – in a serious manner. This means that you have taken care of the bookkeeping and paid tax continually.

• You need to have your principal interests in Swe-den, for example by living here, working here or having your debts here.

• You may not be subject to a currenttrading prohi-bition.

• You need to be able to pay at least one seventh of the price base amount every third month. Statis-tics Sweden works out the price base amount that applies each year. You can find more information on scb.se.

Even if you have gone through a previous debt reconstruction, it may still be possible for you to getanother one, for example if you have incurred new debts or the previous debt reconstruction has been unsuccessful. But you need to have specific grounds to obtain debt reconstruction again.

If you do not fulfil the requirements for debt re-construction for entrepreneurs, you may be able to obtain normal debt reconstruction.

How to apply You apply for debt reconstruction for entrepreneurs by using our form or online service. You can also con-tact a budget and debt advisor for assistance.

The application for debt reconstruction for entre-preneurs is more extensive than the normal applica-tion for debt reconstruction. You need to provide more extensive and more detailed information. For

example, you need to specify your debts and submit attachments of various kinds.

Aside from the conditions and the application itself, the process is very much like that for normal debt reconstruction. The idea is that you will get started with the debt reconstruction as quickly as possible and therefore you start making payments to us as soon as we have decided to initiate debt reconstruc-tion. However, there are some important differences. The following applies to debt reconstruction for entrepreneurs:

• You pay over a period of three years.

• You do not have the opportunity to have a shorter payment period or payment-free months.

• You cannot receive debt reconstruction without paying anything.

• You normally repay your debts every third month.

The reassessment rules are largely the same as those for normal debt reconstruction, but if you are no longer able to pay one seventh of the price base amount, you can apply to have your debt reconstruc-tion cancelled.

When do you receive a record for payment default because of your debt reconstruction?A record for payment default is a record with a credit reference agency that someone has not made their payments. A record for payment default is registered with the credit reference companies when we here at the Enforcement Authority decide to initiate debt reconstruction.

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The records disappear from the credit reference agency’s registers within five years of the date we initiated debt reconstruction. If your payment period lasts longer, they disappear on the day you make the final repayment, at the latest.

For entrepreneurs, the record of payment default disappears within three years of the date we initiated debt reconstruction. If your payment period lasts longer, they disappear on the day you make the final repayment, at the latest.

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Do you want to know more?You can find more information on kronofogden.se. The website has answers to more questions about debt recovery, the online service, application forms, help to fill them in and a function to calculate the amount you are permitted to retain during your debt reconstruction. You can use the search function to get to the pages about debt recovery.

You are also always welcome to call our customer service department on 0771-73 73 00 or email krono-fogdemyndigheten@kronofogden.se.

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