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After the debt mitigation agreement is approved

An agreement is considered approved once all creditors have consented to the terms and conditions laid down in it.

The agreement specifies the length of the debt mitigation period, usually between one and three years.

If it provides for forgiveness of debt, this is generally carried out at the end of the debt mitigation period.

The agreement may provide for the following:

  • Full forgiveness of individual claims.
  • Proportional reduction of individual claims.
  • Deferred payment on individual claims.
  • Amendments to terms and conditions.
  • Payment of individual claims in proportional instalments paid at regular intervals over a specified period.
  • Changes in the form of payment.
  • All of the above.

Provisions on monthly payments

  • When the agreement provides for monthly payments, a bank acting as intermediary prepares a remittance slip (claim sent to online bank), which is paid by the debtor or is direct-debited from the debtor’s account.
  • The intermediary bank then remits payment to other creditors in accordance with the terms of the agreement. The intermediary bank, usually the bank that has the largest number of claims or the highest-value claims on the debtor, takes on the task of intermediating payments to creditors according to the agreement.

What debts are included in the agreement?

  • The debt mitigation agreement covers only those debts that were incurred before the debtor’s application for debt mitigation was approved.
  • Any claims incurred after that period are considered excluded from debt mitigation, and the debtor is responsible for paying them. 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.

The following debts are not included in debt mitigation agreements:

  • Debt due to alimony or child support.
  • Debt due to student loans (it is possible to negotiate deferred payment alongside a debt mitigation agreement).
  • Debt due to fines, value-added tax, etc.
  • Debt accruing after the application for debt mitigation has been approved.

Moratorium on payment

  • When the debt mitigation agreement takes effect, the so-called moratorium on payment expires. Creditors are only allowed to collect on their claims in accordance with the terms of the debt mitigation agreement. Those obligations that rested with the debtor during the moratorium are also cancelled.
  • Further information can be found here.

Amendments to the agreement

  • If unforeseen circumstances arise during the debt mitigation period – for example, an accident, long-term unemployment, etc. – which make the debtor less able to fulfil their obligations under the agreement, the debtor may attempt to negotiate amendments to the debt mitigation agreement with creditors.
  • Creditors can request that the debt mitigation agreement be amended if the debtor’s financial position improves significantly during the debt mitigation period. The word “significantly” means that creditors are not authorised to request amendments if the debtor’s financial position has improved because of their own work or improved wage terms, unless the increase in income is substantial.
  • If, on the other hand, the debtor receives a large lump sum during the debt mitigation period, a creditor may demand that the funds be divided, in part or in full, among creditors without any other amendment to the debt mitigation agreement. Creditors may demand that the agreement be cancelled or invalidated if the debtor seriously neglects their obligations according to the agreement.

Can a debt mitigation agreement expire or lapse?

  • The debt mitigation agreement expires automatically if the debtor is authorised to seek a composition agreement with creditors, if the debtor’s estate is subjected to liquidation, or the debtor dies and the estate is divided without assumption of liability by the debtor’s heirs for the deceased’s obligations.



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