Debt arrangement

A debt arrangement for an entrepreneur’s private finances is possible if the following conditions are met:

• You have little to no debt from your business operations.
• If you have a little debt, the debt may not be overdue and unpaid.
• You are be able to pay the costs arising from your business activities.

The debts of a general partner in a general partnership or limited partnership can only be arranged if the company is solvent and is not under the threat of insolvency or there are corporate restructuring proceedings pending for the company.

A business debt arrangement is possible if the following conditions are met:

• You are a private entrepreneur or self-employed individual.
• Your company’s principal place of business is Finland.
• Your company had a maximum of two employees in addition to yourself in the most recent completed financial year.
• Your business generates enough revenue to be able to make the payments arising from your business operations during the debt arrangement.
• Your business is profitable.
• In debt arrangement, your available funds calculated for the payment plan amount to more than zero.
• Balancing your company’s finances does not require business arrangements, such as corporate restructuring.

It often takes months to apply for a debt arrangement, so you should learn carefully about the prerequisites for the debt arrangement before submitting your application. You can also reach out to Financial and debt counselling.

If a debt arrangement could be possible, do the following:

1. Contact Financial and debt counselling and discuss your situation with a counsellor of theirs.
2. Based on your discussion, you will receive instructions on how to proceed in your case and what documents are necessary for the application.
3. Once you have delivered the documents to Financial and debt counselling, a counsellor draws up a debt arrangement application and a payment plan proposal. The financial and debt counsellor will help you throughout the process.
4. The district court consults your creditors when processing the application and then makes a decision on the debt arrangement. If a debt arrangement is initiated, you will then pay your creditors according to the payment plan.

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 payment plan ends at the time indicated in the plan if no changes have been made to it and no payments have been deferred.

An additional payment obligation arises if your net income specified in the payment plan increases by more than EUR 2000 per calendar year. For the part exceeding this amount, half is paid as additional payments to the creditors. An additional payment obligation may also arise if you receive an inheritance, gift or other one-off payment exceeding EUR 1,000 during the payment plan.

Every year, your income will be compared with the income recorded in the payment plan. Creditors also have the right to request an investigation of your income.

Monitor your income during the payment plan. If your net income increases by more than EUR 2,000, prepare by saving money for additional payments.

More information on the website of Financial and debt counsellingOpens in a new window.

Contact Financial and debt counselling if you need help for assessing the additional payment obligation or calculating the amount of an additional payment instalment.

Your company will have

• an entry of the debt arrangement in the Trade Register and the register of debt adjustments.
• a payment default entry on the debt arrangement. It will be removed when the arrangement ends.

In a debt arrangement,

• you can keep your owner-occupied apartment if you have sufficient solvency
• you can keep the business assets of your company if the assets are necessary for continuing operations
• the guarantor, co-debtor or party who provided collateral pays the part of the debt that you are unable to pay.

Anyone can view details on business debt arrangements from the insolvency register of the National Legal Services Authority (in Finnish and Swedish)Opens in a new window..

The payment default entries of your old company will not be transferred to your new company. So, in principle, your new enterprise can have a fresh start for its operations.

Your background and the backgrounds of other responsible persons will be checked when you start a company. Both personal payment default entries and links to companies with default entries may impair the creditworthiness of the new enterprise and hinder its operation. Such matters as how old the payment default entry is and what it was based on have an impact on the case.

If your old company has tax debts, your new enterprise may not be approved to the Finnish Tax Administration’s registers. It may also be difficult to open a bank account or take out insurances. The situation is particularly difficult if all responsible persons in your new company have payment default entries or links to companies with payment defaults.

The impacts always depend on the case. In some cases, it may be quite easy to run a new business even if there were a history of payment default entries. In other cases, however, it may prove impossible.

It may be difficult to obtain a bank loan if you or someone else in charge of your new company has a payment default entry or a link to a company with payment defaults. It is always worth checking the matter on a case-by-case basis. Different banks may also have different practices.

Usually, a guarantee is required to be granted a corporate loan by a bank. Please note that although Finnvera offers guarantees to start-up companies, it is critical of persons in charge of companies having payment defaults. Finnvera may, therefore, reject your new company’s application on that basis.

Make sure that you are able to properly manage both your new company’s loan management fees and your old company’s debt arrangements.

You can also get external funding for your new enterprise from venture capital investors, such as business angels.

If you have a business debt arrangement, you can also get help with these questions from Financial and debt counselling free of charge.

You can also contact the Yrittäjän talousapu counselling service and the Enterprise Finland advisory service for help free of charge. In addition, you can ask for advice from your regional development companyOpens in a new window. or make use of the paid services provided by legal experts.