Debt arrangements for a trader

The debt arrangement for a private trader is intended for private traders who cannot manage their debts. In the arrangement, a payment programme is prepared for all debts that you have accumulated in your private household and your company. The debts accumulated from your business operations are not arranged on their own.

In the debt arrangement process, some of your property is sold to pay your debts if you do not need it for living or for your business operations. The parties that have guaranteed your debts and provided collateral may also be obliged to pay your debts.

The process of applying for debt arrangements may take up to a year. The actual debt arrangement process often lasts between three and five years. During this time, you will make repayments on your debt on a monthly basis. The size of the monthly instalment depends on your income and the expenses that have been accepted in the debt arrangement.

It is usually specified that you are not allowed to take new debts during the arrangements. If your income increases, you will have to make larger repayments on a yearly basis.

Your company will get a payment default entry on the debt arrangement process. It will be removed when the arrangements are ended. An entry of the debt arrangements is also made in the trade register.

Your company is eligible for a debt arrangement for a private trader if the following conditions are met:

• You are a private trader with a permanent residence in Finland
• You cannot pay your debts within a reasonable time
• Your business activities are in small scale and are mainly based on your own work input
• Your business operations are fundamentally profitable
• Rehabilitating your business does not require corporate reorganisation
• Your company generates enough income so that during the debt arrangement process, you can pay all the expenses arising from your business in time
• Your company is not bankrupt
• The debt arrangement generates more funds for creditors than they would get if your company’s assets were sold.

Please note that a debt arrangement covering your business debts also covers your personal debts. However, the debts are separated depending on whether you have taken them for your company or for private purposes.

Your company is not eligible for a debt arrangement for a private trader if one the following conditions is met:

• Your company is a limited liability company, a general partnership, a limited partnership or a cooperative.
• Your company's debts have resulted from negligence, irresponsibility or crime
• You have neglected to pay taxes, take care of statutory insurance or other statutory obligations in your previous or current business operations
• You are prohibited from running a business
• You have provided false information to the authorities or creditors
• You have transferred funds out of the reach of creditors or speculated otherwise.

Even if one of the above criteria is met, your company may still exceptionally be eligible for debt arrangement for a private trader. This may happen if you are seriously ill or your debts are statute-barred

If you want to have your business debts arranged in the debt arrangement for a private trader, call the Yrittäjän talousapu counselling service.

The service will give you a preliminary estimate of whether you are eligible to apply for the arrangement. If you get a positive reply, make an appointment with the financial and debt counselling of a legal aid office.

Get the documents required for the debt arrangement application and take them to the legal aid office. Note that a large number of documents is required and obtaining them is time-consuming.

After reviewing the documents, the financial and debt counsellor decides whether you can have your business debts arranged. If the assessment is positive, obtain a statement on your company's financial status from an auditor, for example.

Book another appointment with the financial and debt counsellor. He or she will assist you in drawing up an application for a debt arrangement. Submit the application and the appendices to it to a court.

If your company is eligible for a debt arrangement, the court will assign an administrator for you. He or she will draw up a proposal for a debt repayment programme. After all parties concerned have given an opinion of the proposal the court will approve the payment programme. You can now start repaying your debts in accordance with the programme.

During the debt arrangement, your income may increase from what it was when the payment programme was prepared. In that case, set aside some of your additional income because you must pay that to your creditors retroactively once a year.

Every year, your income will be compared with the income recorded in the payment programme. If your income increases by at least EUR 2,046 during the calendar year, you have to make additional payments.

Set aside half of the sum exceeding this total of EUR 2,046 for your creditors. For example, if your income increases by about EUR 4,000 during the year, set aside about EUR 1,000 for your creditors. However, check the limit every year, as it may change.

You may deduct from the part that exceeds the limit any expenses that have not been taken into account in the payment programme, such as commuting expenses and other expenses incurred in acquiring the income.

If you need advice in matters concerning the additional payment obligation, contact the financial and debt counselling of a legal aid office. It helps you to calculate whether you have to make additional payments and how much additional funds you have to pay to your creditor

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