IEEI Dubrovnik 14 / OVER-INDEBTEDNESS Seeking legal solutions to debt problems Dr. Geert Lankhorst Ministry of Justice Ministry of Justice The Hague, Netherlands

IEEI Dubrovnik 14 / A short survey - two topics 1. Dutch legislation on consumer insolvency since Recommendation 2007/8 of the Council of Europe

IEEI Dubrovnik 14 / Chapter 3 of the Dutch Bankruptcy Act Contains a special procedure for overindebted private persons, who are granted access to a court procedure of three years, under supervision of a court appointed trustee / administrator. If the debtor can explain that he is in good faith, and if he fullfills his obligations for three years (=maximum effort to pay off the debts)… … the debtor can obtain in the end a discharge (amnesty) of the remaining debts

IEEI Dubrovnik 14 / current Dutch approach obligation to have a central register of (serious) debts, including consumer credit and house rent debts and mobile phone debts. obligation to check before lending not checking - or checking and finding a bad result - and lending anyway while debtor is overindebted = breach of duty to provide the credit “in good faith” striking a fair balance = not only focussing on the debtor being in good faith when entering a consumer credit contract

IEEI Dubrovnik 14 / encouraging & enforcing out-of- court settlements since January 1st 2008, insolvency judge can force a creditor - who opposed an amicable debt settlement in an unreasonable way - to agree with the proposed debt settlement (new article 287a of the Dutch Bankruptcy Act) Unreasonableness = judge made law

IEEI Dubrovnik 14 / Stand still judgment New article 287b Dutch Bankruptcy Act In an urgent situation of an overindebted household, (for example a house eviction) the insolvency judge can give a court order to creditors to reach a stand still for a maximum period of six months. If an amicable debt settlement could succeed.

IEEI Dubrovnik 14 / Monitoring the policy results each year the Minister of Justice sends a monitoring policy report to Parliament 70% of the applicants who are granted access by the judge obtain after three years the discharge of debts the new provisions appear to be quite a success: strong incentive for creditors to solve “their own” debt problems out of court

IEEI Dubrovnik 14 / overindebted households also in member states that only recently discovered free credit market Not a specific western European problem, but unfortunately a common problem… …that has worsened since the credit crisis 26th Conference of European Ministers of Justice-Helsinki (April 2005) defined it as a common concern: adoption of Resolution on Seeking Legal Solutions to Debt Problems in a Credit Society

IEEI Dubrovnik 14 / Resolution on Seeking Legal Solutions to Debt Problems in a Credit Society What is the value of this Resolution? A political and international recognition of the need to find solutions to solve debt problems in European societies A political and international recognition of the need to find solutions to solve debt problems in European societies Aim: a European Recommendation, generating ideas for an acceptable minimum level of consumer protection Aim: a European Recommendation, generating ideas for an acceptable minimum level of consumer protection

IEEI Dubrovnik 14 / Resolution on Seeking Legal Solutions to Debt Problems in a Credit Society Resolution on Seeking Legal Solutions to Debt Problems in a Credit Society Follow up to the Resolution: an expert report (September 2005) on legal solutions to debt problems in a credit society, drafted by the Department of Law of the University of Umeä, Sweden (Prof, Kiesilainen) Follow up to the Resolution: an expert report (September 2005) on legal solutions to debt problems in a credit society, drafted by the Department of Law of the University of Umeä, Sweden (Prof, Kiesilainen)

IEEI Dubrovnik 14 / The Kiesilainen Report Recognises that over-indebtedness causes a lot of suffering, social and health problems and exclusions for families. Link to education, social cohesion. The legal development in European states has been very different. Need for harmonisation. Prevention of debt & debt-adjustment procedures, Suggests the drafting of a Recommendation on the policies in the field of over-indebtedness Need to establish, examine and share good practices (legal and practical) Strike a fair balance between the responsibility of the creditor and the debtor

IEEI Dubrovnik 14 / Multidisciplinary approach Debt problems cover wide variety of social, financial, legal and psychological problems, too vast to define within the limits of a legal instrument close link to poverty and social exclusion (vulnerable group that has little interest in a European level playing field on credit) legal solutions are powerful, but have a limited range… …so they must be embedded within a wider set of multidisciplinary measures.

IEEI Dubrovnik 14 / Types of measures in Recommendation & Explanatory Report Prevention measures Measures to alleviate the effects of overindebtedness Measures to facilitate rehabilitation of overindebted households and promote their reintegration into society Implementation / follow up measures

IEEI Dubrovnik 14 / COE – Recommendation & Explanatory Report First European legal instrument on consumer debt problems starting point for discussion on national, regional and local levels Accepted by the Committee of Ministers 20th June 2007 (Recomm. 2007, 8 ) towards a European minimum level of policy combatting overindebtedness ?

IEEI Dubrovnik 14 / What to do now ? Member states need not re-invent the wheel again - but use the preparatory work of the COE in their legislation and policies Member states need not re-invent the wheel again - but use the preparatory work of the COE in their legislation and policies Linking the Council of Europe’s pioneer work to other initiatives, sharing expertise such as IEEI. Linking the Council of Europe’s pioneer work to other initiatives, sharing expertise such as IEEI. / activities/legal affairs/legal cooperation/recommendation nr / activities/legal affairs/legal cooperation/recommendation nr