Switzerland’s Federal Council wants to give the hopelessly indebted a fresh start. Two new legal procedures would allow individuals trapped in debt to shed their debts, but centre-right parties in parliament are pushing to water down the plans, reported SRF.
The first element is aimed at debtors with a regular income and would let them reach a settlement with creditors. Repayment capacity would be assessed, and if a majority of creditors approved, a partial write-off could follow. This proposal has broad support.
The second mechanism is more contentious. It targets those with little or no income, whose debts are deemed unpayable. They would be required to contribute as much as possible over three years, after which any remaining debts would be cancelled. Proponents argue that this would reduce stress-induced health costs and welfare spending, while boosting tax revenues as participants return to solvency and pay more taxes.
The Swiss People’s Party (UDC/SVP), backed by the PLR/FDP and the Centre Party, contends that the scheme unfairly shifts costs onto businesses and the public – businesses that write-off loans will need to hike the price everyone pays to cover the losses, they say. Instead they want the process available only once per lifetime and extended to five years, to ensure maximum repayment.
Debt experts that advise those with debt problems disagree. A three-year term is more realistic and keeps debtors engaged. Creditors will recover more in three years than in a five-year plan that many will abandon, argues one expert.
A parliamentary committee has sided with the UDC/SVP’s stricter version, signalling that the National Council may follow suit in the autumn parliamentary session. For Switzerland’s most indebted, a second chance may come with heavier strings attached.
More on this:
SRF article (in German)
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