Frequently Asked Questions

Limitation period for claims

General limitation period

• In general, the limitation period for claims is four years. This rule applies unless otherwise specified by law, and it applies to the vast majority of claims. It should be noted that claims according to debt instruments or claims based on monetary loans generally have a ten-year limitation period. This does not apply to interest and indexation, however. The beginning of the limitation period is usually the day the creditor was first entitled to receive payment of a debt from the debtor; this is typically the payment due date.

Interruption of limitation period

• A creditor may interrupt the limitation period by filing a request for distraint or forced sale with the Commissioner’s Office, filing a petition for bankruptcy proceedings, filing a claim against a bankruptcy estate, or initiating legal action. This triggers the start of a new limitation period. A debtor may interrupt a limitation period by acknowledging the claim, which is done with a payment towards the claim or with an agreement laying down terms of payment. Payment by netting of debt and garnishment of wages do not interrupt the limitation period, however. (According to information from the Iceland Revenue and Tax website: http://www.skatturinn.is) A limitation period is not interrupted when a dunning letter is sent to the debtor or a collections notice is sent from a collections agency.

Limitation period after bankruptcy

• Claims that are not paid during bankruptcy proceedings expire two years after the end of the division of the bankruptcy estate. Furthermore, a special rule applies in connection with bankruptcy proceedings: the creditor may only interrupt the limitation period by means of a declaratory judgment. In order to obtain such a judgment, the creditor must demonstrate that it has particular interests at stake in interrupting the limitation period and that it can be deemed likely that the claim will be satisfied during a new limitation period. If a debtor acquires assets during this two-year period, the creditor may file to have the assets subjected to distraint during the two-year period. In such a case, the limitation does not apply to the portion of the debt covered by the asset concerned. ATH. On the other hand, the debtor can interrupt the limitation period following bankruptcy according to general bankruptcy rules. For further information, see the discussion on the debtor’s position following bankruptcy.

What is a credit score?

In the Act on Consumer Loans, no. 33/2013,a credit score is defined as the lender’s assessment of a borrower’s creditworthiness, based on information that is likely to a provide reliable indication of the probability that the borrower will be able to honour the loan agreement. The credit score shall be based on the business history between the parties and/or information from financial and credit record databases. The credit score does not entail an assessment of debt service capacity unless this is requested explicitly.

What is an assessment of debt service capacity?

The Act on Consumer Loans, no. 33/2013, defines an assessment of debt service capacity as the calculation of the amount a borrower can pay, based on the borrower’s assets, liabilities, expenses, and income. These factors are in turn based partly on official consumption guidelines.

What is the default register?

The company Creditinfo is licensed by the Data Protection Authority to collect and record information on individuals’ creditworthiness, for the purpose of sharing that information with others. Creditinfo maintains a so-called default register, which contains information on individuals’ arrears, together with information on collections measures. Entities that have a subscription agreement with Creditinfo may request that a debtor be entered to the default register; however, in the case of individuals, the arrears must have persisted for at least 40 days, and the amount must equal ISK 50,000 or more. Unsuccessful distraint actions and bankruptcy rulings may be entered to the default register irrespective of the amount involved, however. One purpose of the default register is to give lenders the opportunity to determine an individual’s position before approving a loan application or opening an account with that individual. Further information can be obtained from the Creditinfo website.

When is an entry removed from the default register?

• An entry is removed when Creditinfo has received confirmation that the claim has been settled. Furthermore, entries are removed when four years have passed from the date a summons is signed or unsuccessful distraint action is carried out. When an individual’s estate has been subjected to bankruptcy proceedings, the entry on the bankruptcy is removed two years after the date the proceedings are concluded (see the Creditinfo website).

May I apply to the Icelandic Student Loan Fund for an exemption from student loan payments?

• Yes. An exemption will be considered when eligible studies, unemployment, disability, illness, pregnancy, child care (childbirth leave), spousal care (care benefits), or other comparable circumstances cause severe financial difficulty.
• In general, exemptions are not granted to those whose annual income in 2019 is over ISK 4,470,000 in the case of an individual and over ISK 8,940,000 in the case of a married or cohabitating couple. Further information can be obtained from the Icelandic Student Loan Fund.