Moratorium on payment

What a debtor must do during the moratorium:

• Set aside from wages and other income the amount in excess of what the debtor needs for their own living expenses and those of their family; cf. the calculated debt service capacity specified in the decision to approve the application. If the premises for the calculation change for any reason – i.e., income or expenses – the debt service capacity shall be adjusted to reflect the changes and the supervisor shall be notified.
• The debtor must open or select a separate bank account for this purpose. If needed, open a new bank account in consultation with a banking institution if a bank account with overdraft privileges is closed following a moratorium on payment.
• If applicable, provide the applicant’s employer with the new account number.
• If necessary, apply for a prepaid credit card, as all credit cards are closed following a moratorium.
• Cancel contractual agreements entailing future expenditures not related to goods and services necessary for personal support or normal household operations.
• Notify the supervisor immediately of any changes in the debtor’s circumstances; i.e., as regards income, expenses, legal address, family size, or legal divorce.
• The debtor is strongly encouraged to contact their commercial bank/credit card company immediately to make arrangements concerning their wage account and credit card.

During moratorium on payment, the debtor may not do the following:

• The debtor may not deliver or pledge assets and valuables that could be useful to creditors as forms of payment. This implies, among other things, that the debtor may not repay loans from family members or friends, or provide others with financial assistance.
• If the debtor receives an offer on any assets during the moratorium, s/he shall contact the Office and receive instructions concerning the next steps to take. The debtor may not undertake new debts or take other measures that could damage creditors’ interests unless the obligation in question is necessary to cover the living expenses of the debtor and his/her family.

During moratorium on payment, the debtor may pay the following:

• Expenses related to day-to-day household operations. Use the Debtors' Ombudsman’s cost-of-living references as a guideline in determining what is considered normal expense based on family size.
• Expenses relating to the operation of the home, such as property taxes, residents’ association fund, insurance, heat, electricity, and telephone. The debtor shall not pay older amounts in arrears but shall only pay claims that fall due during the moratorium period.
• All public levies and alimony/child support. The debtor shall not pay older amounts in arrears but shall only pay claims that fall due during the moratorium period.
• All claims accrued during debt moratorium due to living expenses and necessary expenses; i.e., dental care, pre-school fees, motor vehicle repairs, and the like. The debtor shall not pay claims that fell due before the moratorium began.
• It should be noted that the moratorium does not apply to claims established after the debt mitigation application is approved.

During moratorium on payment, the debtor may not pay the following:

• Loan instalments; i.e., mortgage loans, motor vehicle loans, or student loans that the debtor took before the moratorium began. No payments are made on such loans during the moratorium. This applies irrespective of whether the loan payments are up to date or in arrears.
• Instalments on motor vehicle contracts made before the moratorium began. No payments are made on such motor vehicle contracts during the moratorium.
• Overdraft debt dating from before the moratorium began.
• Credit card bills that fell due before the moratorium began.
• Alimony or child support that fell due before the moratorium began.
• Student loan instalments that fell due before the moratorium began.
• Tax debt that fell due before the moratorium began.
• Other claims that fell due before the moratorium began.

The Office encourages the debtor to contact the supervisor if they are in any doubt about what to pay during a debt moratorium.

Creditors may not do the following:

• Demand or accept payment of their claims.
• Accelerate debts in accordance with contractual authorisations.
• Subject the debtor’s assets to distraint, seizure, or impoundment or have them sold at a forced auction.
• Have the debtor’s estate subjected to bankruptcy proceedings.
• Demand payment from guarantors or undertake any measures to collect payment of claims.
• Undertake any measures to collect payment of claims secured by a borrowed lien.
• Refuse to deliver, against cash payment or acceptable collateral, goods or services that the debtor requires for his/her support, on grounds of prior arrears. This means, for example, that the creditor should provide heat and electricity services in spite of previous arrears if current invoices are paid during the moratorium.

The commercial bank/creditor will do the following:

• Close all bank accounts with overdraft privileges.
• Establish, at the debtor’s request, a debit card with usage restrictions.
• Close all credit cards except for prepaid “plus” cards.
• Cease all collections measures.
• Stop sending remittance slips (it should be noted that in some instances, remittance slips will appear in the online bank).
• Cancel all direct debits and automatic debit transactions.
• Call in all split payments on credit cards.
• Discontinue payment services.

Do claims increase during moratorium?

• Treatment of claims may differ, depending on which creditors are involved and whether the case concludes with a debt mitigation agreement.
• Creditors are authorised to charge regular interest on their claims.
• Some creditors – such as the Housing Financing Fund (HFF), Landsbankinn, and the Pension Fund for State Employees – add loan instalments that accumulate during moratorium to the principal amount of the loan when a debt mitigation agreement is made.
• If a debt mitigation case concludes without an agreement, loan instalments that went unpaid during the moratorium will be collected.
• Some holders of statutory liens calculate penalty interest for the period while the moratorium is in effect, until the arrears are paid in full (for instance, property taxes and residents’ association funds).
• It follows from this that claims can increase during the moratorium.
• Further information can be obtained from the Office of the Debtors' Ombudsman or the supervisor if the application has been approved.