Effective ways to settle debts in Switzerland – Debt Consolidation Plan
While around 13% of the Swiss have already been refused a loan, nearly 561,000 people are in debt overhang in Switzerland in 2019, i.e. 119,000 more than in 2016. It is in French-speaking Switzerland that we find the largest number of debtors with a rate of 10.9% in Neuchâtel and 10.4% in Geneva. The most common debts are those related to taxes, which concern 80% of debt cases.
The origin of debts is most often found in personal problems, such as dismissal, divorce or illness. Furthermore, young people are more affected. In fact, 80% of over-indebted debtors began to go into debt before 25 years of age. If in the 18-25 age group, men and women are equal vis-à-vis the debt problem, in the 36-40 age group, men are more likely to contract debts.
Faced with a situation that can affect everyone, here are some tips to take control of your financial situation.
Debts, where to start?
In order to calculate the extent of debts and begin to implement a solution to get out of this hellish spiral, you must first be aware of the situation, which is not always easy.
Very often, people in debt feel very strong shame and do not dare to talk about it. It is a mistake! Very often, talking about it with people you trust will restore your self-confidence and the process of deleveraging can begin.
The best is to go to a cantonal council which will help to make the list of creditors, but above all establish a serious and realistic budget for a relatively low cost.
Get help from a professional
In order to set up a debt reduction plan, also called a debt consolidation plan, the debtor with the help of his adviser if he has one, each debt must be carefully recorded. This plan, which spans 36 months most of the time, takes into account the person’s finances, but not only. His personal situation, his ability to provide for his current needs and his taxes without contracting new debts as well as his state of health is also taken into account.
There are many advantages to going through an advisor. First, debt management goes through the advisor and not the debtor, who can focus on the essentials and receive sound advice to improve his daily life and regain control over the management of his budget. Second, the advisor can negotiate much better with creditors because he has the knowledge he needs. Knowing that more than 80% of people in debt have tax debts, it is the Tax Office that decides and there, the negotiations are tougher.
Optimizing your budget
Having debts has many consequences on the life of the debtor, who must now learn to live in a different way. The goal? Spend less and give priority first to the expenses necessary for daily life, such as rent and related costs, food, compulsory insurance, medical costs, means of transport to go to work, pensions food if there are any and taxes. The advisor analyzes the monthly expenses and checks whether an insurance premium can be waived or modified for those which are not compulsory, whether leasing or a credit can be bought back.
Paying off debts: main strategies
Accounts receivable are debts are the amounts are not very high.
• The reimbursement must be made within a maximum of 36 months.
• The advisor or the debtor can, after negotiations, ask the creditors to abandon the interest.
• Always pay them on time, respecting a precise repayment schedule.
Partial forgiveness of debts
Also called extra-judicial or judicial composition with surrender (LP art.333 and SS), this strategy is made for debtors who have the means, but debts too high to be reimbursed in 3 years.
• Request a stay of creditors and propose a repayment plan spread over a maximum of 36 months.
• Offer as much money as possible and negotiate with the creditors who then accept this amount and settle the debts.
Debt payment plan
Also called extrajudicial composition without surrender, this strategy is suitable for debtors who can afford to repay their debts in 3 years. Always treat all creditors equally and pay them all back at the same time.