If you are unable to pay your debts
If you cannot pay you debts
- you should immediately contact your creditors to agree on payment arrangements with them
- if necessary, get in touch with the financial and debt counselling of your local legal aid office, or the debt line or chat of the Guarantee Foundation
- you can seek a social loan from your municipality of residence or loan guarantees from the Guarantee Foundation
- you may have to pay your debts through enforcement
- as a last resort, you may seek debt arrangements for a private person.
If you cannot pay your debts by the due date, you should immediately contact your creditors to agree on payment arrangements with them. These arrangements could include postponement of the due date, smaller monthly instalments or instalment-free periods. If you tackle your payment problems in time, you have better chances to sort them out. Remember, however, that in negotiations with your creditors, you should only make promises that you can keep.
You can negotiate on payment arrangements with your creditors even if the debts have already been transferred to a collection agency, enforcement or a court. Agreeing on payment arrangements directly with your creditors usually costs you less than collection or enforcement.
If you need help with your debt problems, contact the financial and debt counselling of your local legal aid office or the debt line or chat of the Guarantee Foundation. The services are free of charge.
If you fail to pay your debts, you may get a bad credit record (a payment default entry). A bad credit record can make your life more complicated in many ways. For example, you may find yourself in a situation where you cannot take out a loan or an insurance policy, make hire purchase agreements, rent a flat, or get a telephone connection. Moreover, your credit record may be checked before you conclude an employment contract in a job where you are directly responsible for the employer’s assets.
Debts do not always lead to a payment default entry. You will only get a payment default entry if you fail to pay a debt by a certain deadline as the collection progresses. The creditor must also notify you if there is a risk that you will get a payment default entry. The holder of the credit information register will notify you of your first payment default entry in writing.
Provisions on payment default entries are contained in the Credit Information Act. For more information about payment default entries, visit the websites of the financial and debt counselling and the Finnish Competition and Consumer Authority.
If you have not paid your debts even when requested to do so, they will be transferred to enforcement. The enforcement process can only start after the creditor has obtained a court order on the matter. However, no court order is needed if the debt concerns taxes, certain insurance premiums or other claims under public law.
The enforcement authorities will first send you a payment reminder. If you do not comply with the reminder, the debt will be recovered from your earnings, pension, business income or other income or assets. In practice, the enforcement authorities will ask your employer or pension insurance company to withhold the sum directly from your earnings or pension.
However, you can keep part of your income as protected portion. When calculating the protected portion, the authorities will take into account your family members who live in the same household with you and whose livelihood depends on you.
If you cannot manage your debts in any other way, you may apply for debt arrangements for a private person, which is a statutory scheme. Under this scheme, some of your assets are sold so that you can pay at least part of your debts. The parties that have guaranteed your debts may also have to pay some of your debts.
For debt arrangements, contact the financial and debt counselling of your local legal aid office. The financial and debt counsellor helps you to submit an application for debt arrangements to a district court. If your application is approved, you will have to make debt repayments for between three and five years, depending on your financial situation. The rest of your debts are forgiven.
If your income increases during the debt arrangements, you must pay part of the additional income to your creditors on a retroactive basis each year.
The debt arrangements for a private individual can only be used if all other arrangements have failed. For this reason, before submitting the application for debt arrangements, find out whether an agreement with your creditors is possible. You can also seek guarantees from the Guarantee Foundation under which you can combine your debts into a new bank loan. In another option, you may be eligible for a social loan offered by your municipality of residence, or you can repay your debts through enforcement.
If you are a private entrepreneur, take a look at the debt arrangements for private persons from the private entrepreneur’s perspective.