Over-Indebtedness

Who may be affected?

Over-indebtedness is a social phenomenon which is generally believed to be spreading in the industrialized countries.

Significantly enough, over-indebtedness affects all social categories without any particular distinction between them. This observation is hardly surprising because the debts incurred by each individual tend to follow his income situation. The result is that incidents in life which are liable to affect anyone in equal measure can create similar problems for the assets of the persons concerned. Over-indebtedness is in fact caused in the main by unforeseen circumstances. An accident, a state of dependence or a divorce are liable to disturb or even destroy previous forecasts and throw budgets established in a calmer period of life out of balance.

But there are other causes such as a careless attitude and inability to draw up a family budget, the uncontrolled use of credit cards and the accumulation of different kinds of loan (mortgages-consumer loans) and credit lines with different credit institutions and suppliers of consumer goods.

Definition

Over-indebtedness is defined as a Luxembourg-domiciled debtor’s obvious impossibility to meet the whole of his (non-professional) debts as well as the commitment he has made to guarantee or to be solidarily liable for the debt of an individual entrepreneur or a company, if he has not been director of the latter.

Whom to contact?

If repayment difficulties are experienced, the first discussion partner of the debtor must be their banker. If an arrangement cannot be found with the latter, the law of 8 January 2013 on over-indebtedness lays down a procedure for collective settlement of debts with a view to restoring the situation of the person who is excessively indebted (an individual) by enabling them to repay their debts under conditions which are acceptable to all the parties concerned.

This is a three-stage procedure:

  •     the stage of agreed settlement before the Mediation Committee
  •     the phase of judicial settlement before the justice of the peace
  •     the personal restructuring phase before the justice of peace

The bodies involved in such matters are:

  •     a national information and advisory service on over-indebtedness;
  •     the Mediation Committee;
  •     the justice of the peace;
  •     the debt restructuring fund.

The settlement procedure

The agreed settlement procedure is opened in response to a formal request made by the debtor to the information and advisory service on over-indebtedness which then examines the case. This introductory stage involves the suspension of all enforcement procedures against the assets of the debtor. The service draws up a draft recovery plan which it then submits to the Mediation Commission. This plan defines the mutual obligations of the parties concerned. If the recovery plan is not accepted by the parties concerned, the service must inform the debtor; in that case, a judicial recovery procedure may be envisaged before the justice of the peace.

In the framework of the procedure for collective debt settlement, the restructuring fund is able to grant the debtor a consolidation loan at the initiative of the Mediation Committee or of the Justice of the Peace. A loan of this kind is redeemable by fixed monthly payments and the redemption period cannot be longer than seven years.

The personal restructuring procedure is reserved for private individuals who are excessively indebted and whose situation is irreparably compromised. It consists of wiping out non-professional debts with the liquidation of assets.

Useful addresses

Ligue luxembourgeoise de prévention et d’action médico-sociales
Service d’information et de conseil en matière de surendettement
2, rue G.C. Marshall | L-2181 Luxembourg
Tel. : 48 83 33 1
E-Mail: ligue@ligue.lu | Website

Interactions
Service d’information et de conseil en matière de surendettement
1, rue Helen Buchholtz / L-4048 Esch/Alzette
Tél: 54 77 24 – 1 / Fax : 54 77 24 – 26
E-Mail: endettement@inter-actions.lu| Website