Debt assistance

What we do

Debt counselors act as mediators between debtors and creditors for those experiencing financial difficulties. The goal is to find a solution for a client's problem debts.

In debt counseling, there is an increasing focus on prevention. Education to prevent debt, early detection of financial problems, and training to protect clients against (new) problems or to enable them to become permanently financially independent are important prevention activities.

Situations are conceivable where there is no problematic debt situation or where the client can resolve their problems themselves. In this case, information and consultation tools can be used. The client is helped to address or manage their situation independently. This usually involves advice on return proposals, budget guides, and budget coaching.

Questions about debt assistance? Then contact us!

Debt assistance as a statutory task: the Municipal Debt Assistance Act

Since the entry into force of the Municipal Debt Assistance Act (Wgs) in 2012, debt assistance has been a statutory task of municipalities. The Municipal Executive is responsible for a widely accessible range of debt assistance to residents and plays a coordinating role in preventing and resolving problematic debts. Following an application, the municipality issues a formal decision within eight weeks and records the agreements in an action plan. This decision is a formal resolution within the meaning of the General Administrative Law Act (Awb), as a result of which administrative legal protection is available.

As of January 1, 2021, the Wgs (Social Support Act) has been expanded to include a basis for early warning: fixed costs partners such as landlords, energy and drinking water companies, and health insurers report payment arrears to the municipality, enabling it to proactively offer residents assistance. For municipalities and their chain partners in the Social Domain, this raises questions regarding data exchange, privacy, and the scope of the duty to provide assistance. Our lawyers and in-house counsel advise public authorities, partnerships, and implementing organizations on these matters, while simultaneously assisting entrepreneurs – from international corporations to the baker around the corner – who are facing financial difficulties or a rejected payment arrangement.

Objection and appeal against rejection or withdrawal

If the municipality rejects an application for debt assistance or withdraws an ongoing process, the person concerned may lodge an objection against this. Because the decision is a decision within the meaning of the General Administrative Law Act (Awb), an objection period of six weeks applies after the notification of the decision (Article 6:7 Awb). If the objection is declared unfounded, an appeal may be lodged with the District Court, Administrative Law Sector, followed by an appeal to the Central Appeals Board or the Administrative Jurisdiction Division of the Council of State. In urgent cases, a preliminary injunction may be requested from the preliminary relief judge (Article 8:81 Awb).

The National Ombudsman has been critical of the grounds for refusal applied by municipalities. A successful objection stands or falls with a well-substantiated notice of objection, in which the conditions for admission, the principle of proportionality, and the duty to provide reasons are central. This is specialized work for which our lawyers are trained.

Grounds for refusal: when may the municipality refuse debt assistance?

The Municipal Debt Assistance Act (Wgs) is based on broad accessibility but provides for several specific grounds for refusal. Pursuant to Article 3, paragraph 3, of the Municipal Debt Assistance Act, the Municipal Executive may refuse debt assistance if a person has committed fraud resulting in financial prejudice to an administrative body and has been irrevocably convicted of a criminal offense or has received an administrative fine in connection therewith. A refusal or restriction must always meet the requirements of proportionality and justification. Categorical exclusion – for example, of self-employed individuals or homeowners – is inconsistent with the statutory mandate and frequently fails before the administrative court.

Breathing space: the broad moratorium and coercive measures

If the amicable settlement process stalls because one or more creditors continue to collect, the law offers instruments to create a period of calm. Pursuant to Article 5 of the Municipal Debt Assistance Act, the court may, upon request, declare a broad moratorium: a cooling-off period of up to six months during which creditors cannot exercise their recovery rights, giving the debt counselor room to reach a settlement.

In addition, the Bankruptcy Act contains coercive measures that support the amicable settlement process. By means of a request pursuant to Article 287a of the Bankruptcy Act, the court can compel an unwilling creditor to cooperate in a proposed debt settlement (the compulsory settlement procedure). Pursuant to Article 287b of the Bankruptcy Act, a preliminary injunction (narrow moratorium) can be requested to temporarily prevent, for example, an eviction or the disconnection of energy. The use of these instruments requires careful choices regarding procedural positioning; our legal experts assess on a case-by-case basis which route offers the best chance of success.

From amicable settlement to Wsnp

Debt assistance has an amicable and a statutory track. In the amicable phase, the municipality or a debt assistance organization negotiates a debt settlement with the creditors, usually involving a repayment or restructuring period of eighteen months. If this fails because agreement cannot be reached with all creditors, recourse may be had to the court under the Debt Restructuring Act for Natural Persons (Wsnp).

Admission to the Wsnp is subject to the conditions of Article 288 of the Bankruptcy Act, including the requirement that the debts were incurred in good faith and left unpaid. The hardship clause of Article 288, paragraph 3, of the Bankruptcy Act allows the judge to admit an individual nonetheless if the cause of the problematic debts has been brought under control. A smooth transition between the amicable and statutory processes is essential; we guide debtors and involved organizations through both tracks.

What MKB Juristen does for you

Debt assistance touches upon both administrative law (access, objection, and appeal) and insolvency law (moratorium, compulsory settlement, Wsnp). MKB Juristen works with mixed teams of lawyers and in-house counsel, allowing us to combine both perspectives. We advise municipalities and implementing organizations on the structuring of their debt assistance policy within the Social Domain, and assist entrepreneurs and private individuals in disputes regarding access to debt assistance or in the process towards a debt settlement. Whether you are a large corporation or the baker on the corner: we help find a workable and legally sound solution.

Do you have questions about debt assistance, a rejection, or a stalled debt settlement? Feel free to contact us.