Debt counseling in The Netherlands

Albert Luten

November 26, 2010

National Institute forBudgetinformation

• Consumers information– Website– Leaflets, software– Call center– Press

• Professionals– Courses– Software

Debt regulation

• Amicable debt settlement– Social banks– Social services– Others, ..

• Legal debt settlement– Court– Since 1999

> After three years a fresh start

Repayment capacity

• Early nineties: 3 methods

– Detailed budget method

– Global budget method

– ‘Legal method’

> Unification was needed!

1999 Legal phase

• All courts used the legal method

• But many differences in interpretation

• Sometimes large differences in outcomes

Recofa Commission

• Develop one method / interpretation of the legal method

• Simply: it must work for 95% of the cases

• Develop software

• Maintain the method

Law art. 475 d

• Not seizable income:

– 90% of the social minimum – Correction for rent– Correction for health insurance

premium

– Plus a ‘nominal amount’

Social minimum

• In The Netherlands we have one social minimum:

– 1300 euro per month for a couple. – 90% for lone parents– 70% for singles

• Else: you have to make one: – Focusgroups (FBU, Un. of York)– Reference budgets– Other method: budget method

Rent correction

Rent 700

Rent in social minimum 220 –

Rent subsidy 350 –

Correction for rent: 130

- with a maximum

- service costs: partly

Housing costs

• High rent: move or an extra (temporary) correction

• Own house: sell it or same correction as rented house

• Boarding money, children with an income

Correction health insurance

Total premium 200

In social minimum 45 -

Healthsubsidy 120 -

Correction 35

Own risk: payed from the estate when used

Legal part

Total net income 1500

90% social minimum 1170

Corr. rent 130

Corr. health ins. 35

Total corrections > 1335

Repayment capacity 165

Nominal part

• The judge is free to decide upon this

• The commission made rules for this part, so everybody is treated ‘equal’

• Specific points: individual solution

Corrections nominal part

• All costs that cannot be paid by the social minimum plus legal corrections:

- Corrections for subsidies

- Corrections for income earning costs

- Other costs

Corrections for subsidies

Households with a minimum income have higher subsidies: correction for households in debt advice that are also on a minimum level, but with a higher taxable income

Child allowance: say 120 at minimum, 80 with income 1500

Correction: 40

Corrections income earning costs

• Standard 5% for people with work (stimulus)

• Travel costs

• Costs of childcare

• Car: depends

• Study costs: depends

Other costs

• Costs of a handicap

• To visit a hospital

• ...

Not:

• Donations to f.e. church

• Transfers abroad

Nominal part

• 5% extra for workers

• Extra rent costs

• Car

• Childcare

• Child allowance

• Study costs

• Alimony

• Handicap

• Other

Income

• Only incomes that can be attached: wages, social benefits, tips, pensions, et cetera

• Not: child allowance, subsidies, orphan benefit

E N D

• www.nibud.nl

• European Consumer Debt Network: ECDN

http://www.asb-gmbh.at/ecdn/index.php

www.referencebudgets.eu