Author: Antoni Seuren
By 2015, private debt totalled to 700 billion in the Netherlands (Mulder 2019). For context, this is roughly equal to the GDP of the Netherlands in 2014 (Mulder 2019). Therefore, it is important to have judicial procedures in place to account for debt management and payment.
Stage 1: When Debt Payment is Missed
Should a payment be missed, it is the creditors role to send a letter to the debtor to inform them that payment has been missed. This is an informal procedure without judicial or 3rd party involvement. A creditor is the actor who receives debt payments, whereas the debtor is the actor who pays it (RPS Legal 2019).
For example, if a man is interested in buying a boat but does not have enough money to pay for the boat fully, he can approach a bank for a loan. The bank then takes a risk assessment to determine the likelihood of being paid back the loan, with interest. This is determined through assessing the man’s assets and wealth. Contraction negotiations then take place to determine monetary loan amount, interest rate and timespan to pay the loan. Once the loan has been granted, the man becomes indebted to the bank. With the addition of the loan, the man buys the boat. Should the man then miss a payment, it is the banks obligation to send the man a reminder (RPS Legal 2019).
Stage 2: Payments Missed Continually
After several letters have been sent the creditor is in the right to call upon a lawyer specialized with debt collection. The lawyer then interacts with the debtor on behalf of the creditor. This marks the first stage of the judicial procedure. Debt collection now evolves from an informal interaction between two parties to a legal interaction between three parties. The lawyer, acting in the interest of the creditor, assesses the debtor’s situation (wealth and assets) (RPS Legal 2019). The lawyer then edits the terms of negotiation and sets some of the debtor’s assets as collateral (Bierens 2019). The collateral acts as a safety for the creditor and covers part, or all, of the remaining debt in asset value.
For example, the man has missed his loan and interest repayment for 4 months, despite receiving reminder letters from the bank. The bank has now approached a lawyer to handle the matter. The lawyer then approaches the man and discovers that his divorce made him unable to pay. The lawyer proceeds to consult the man and determine his financial situation. The man reveals he has an apartment out of state. The lawyer then values the apartment to the remainder of the debt, and finds that it is appropriate (Bierens 2019).
Stage 3: Collateral Options Not Accepted by Creditor
In the case that the debtor cannot pay the debt that is owed, or the creditor does not accept the proposed collateral scheme, the creditor can commence judicial proceedings. These proceedings make court appearances mandatory. During these proceedings the debtors’ account and assets are seized, and are only relieved after the court announces a decree for the debt payment. Should judicial proceedings be met without rebuttal or appeal, they usually last up to 2 months (Bierens 2019).
For example, the bank does not accept the man’s out-of-state apartment as collateral. The bank can then go to court, having done the previous stages. The court then submits a mandatory summoning for both parties. It is now in the hands of the court to determine an outcome, until then the man’s finances are frozen (Bierens 2019).
Stage 4: Court’s Decision
Once a decision is decreed by the judicial court that favors the creditor, the debtor must undergo a court determined debt-restructuring program (Bierens 2019). The law stipulates that the debtor, for a period of 3-5 years, must live off an income equal to the minimum wage. Any additional income that is made will serve to pay off the debt (Business.gov.nl 2019). After 3-5 years the debt is relieved and the debtor may start anew, even if the debt is not covered in its entirety. However, from here on out it will become substantially more difficult for the debtor to receive credit. For example, the court has determined that the man has to undergo a debt-restructuring program. The man, must then for a period of 3 years live with minimum-income. The rest of his income going to the bank to pay off the boat he previously purchased. Once the debt is repaid, the man can assume life as normal however will unlikely get further bank loans, unless his circumstances changed (Business.gov.nl 2019).
Bierens Group (2019). “Debt Collection in the Netherlands – No Cure No Pay” Bierens. At https://www.bierensgroup.com/en-gb/debt-collection-netherlands/.
Business.gov.nl (2019). “Debt restructuring.” Government information for entrepreneurs. At https://business.gov.nl/regulation/debtrestructuring/.
Mulder, N. (2019). “A New Dutch Disease? Private Debt in the Netherlands.” Private Debt Project. At https://www.privatedebtproject.org/view-articles.php?A-New-Dutch-Disease-Private-Debt-in-the-Netherlands-22.
RPS Legal (2019). “Debt Collection in The Netherlands.” RPS Legal. At http://www.debtcollectionnetherlands.com/.