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Unforeseen circumstances

If unforeseen circumstances arise during the debt mitigation period which make the debtor less able to fulfil their obligations under the agreement – for example, an accident, long-term unemployment, etc. – the debtor may request that the agreement be amended.

What can be amended?

  • Amendments to a debt mitigation agreement could entail, for instance, deferral of payments, reduction of payments, or the sale of assets. If a debtor is faced with unforeseen expenses during the debt mitigation period, amending the agreement could entail deferral of payments.
  • The length of the deferral is based on the amount of the unforeseen expenses and the amount of the monthly instalments. If the unforeseen expenses total ISK 300,000.00, for example, and the monthly payments according to the debt mitigation agreement are ISK 100,000.00, the debtor could propose that the creditors grant a grace period (deferral) of three months. A debtor experiencing financial difficulties due to a reduction in income or an increase in living expenses could propose that the monthly payment amount be reduced by an amount corresponding to the reduction in their ability to pay.
  • If the debtor owns real estate, the conclusion could be that it is necessary to require the sale of the asset as part of the amended agreement. This could apply, for example, if it emerges that the debtor’s debt service capacity no longer covers actual instalments on collateralised claims within the appraised value of the property.

How are amendments requested?

  • Before requesting that the debt mitigation agreement be amended, the debtor must have attempted to reach an agreement to this effect with all of their creditors. If such an agreement is made, it shall be presented to the Debtors’ Ombudsman, and the amendments will not take effect until the Debtors’ Ombudsman has approved them.
  • If the Office of the Debtor’s Ombudsman considers the amendments unfair or inappropriate, it shall reject them; however, this should be done only in exceptional circumstances.
  • Upon request, the Debtors’ Ombudsman may assist debtors in reaching an agreement with their creditors concerning amendments to their debt mitigation agreement. Such assistance could entail, for example, presenting proposals for possible amendments and acting as an intermediary in the communications between debtor and creditors.
  • Contact Debtors' Ombudsman for furter information
  • If an agreement is reached, the debtor must request in writing that the Office of the Debtor’s Ombudsman confirm the amendments. An agreement amending a debt mitigation agreement takes effect upon being confirmed by the Debtors’ Ombudsman.
  • If an agreement cannot be reached with creditors, the debtor may nonetheless request of the Debtors’ Ombudsman that the terms of the debt mitigation agreement be amended according to the debtor’s proposals. Before making such a request, the debtor must have made every possible effort to reach an agreement with creditors concerning the amendments.
  • In order for the Debtors’ Ombudsman to confirm the debtor’s proposals for amendments to the agreement, it is required that unforeseen circumstances arising during the debt mitigation period have compromised the debtor’s ability to fulfil the terms of the agreement. The debtor’s request shall not be considered if the change in circumstances can be traced to irresponsible conduct on the debtor’s part.
  • The debtor shall submit requests for amendment of a voluntary debt mitigation agreement to the Debtors’ Ombudsman. 

Debt missing from the agreement

  • If, after the debt mitigation period begins, the debtor is made aware of a debt incurred before the debt mitigation agreement was approved, that debt will be included in the debt mitigation measure.
  • A debtor who wishes to include the debt in the debt mitigation agreement shall fill out a form for this purpose.

When can creditors demand that an agreement be amended?

  • Creditors may demand that a debt mitigation agreement be amended if the debtor’s financial position improves markedly during the debt mitigation period. Agreements will not be amended due to an increase in the debtor’s income unless the increase is sizeable. Furthermore, if a debtor receives a large one-time payment during the debt mitigation period – an inheritance or other such payment – a creditor may demand that part or all of the funds be divided among creditors.
  • If circumstances arise that entitle a creditor to demand that a debt mitigation agreement be amended, invalidated, or cancelled, the debtor shall notify their creditors of those circumstances within one month and in a secure manner.


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