In a debt restructuring process, the debtor reaches an agreement with all the creditors regarding repayment of the debts, and there are no remaining debts at the end of the process. The debtor and creditors agree that either all the debts or only a proportion of the debts will be paid back in instalments (see: How much must I pay the creditors?). The debts may be unpaid bills (e.g. outstanding loan instalments) and/or debts for which certificates of unpaid debts in distraint proceedings or certificates of shortfall established after bankruptcy already exist.
In order for a debt restructuring process to take place, sufficient money must be available to make the creditors an offer. The debtor either has assets (e.g. from an inheritance) and/or they have a budget surplus (see: What is a restructuring budget?). It is important that the debtor does not build up any new debts during the debt restructuring process. It is a precondition for the process that the debtor has a secure income, is able to pay their current bills, and also that they are in a stable personal and family situation. As a basic principle, the creditors must agree to the debt restructuring process (see: What debt restructuring options are there? / What is an extra-judicial debt restructuring agreement? / What is an amicable debt settlement? / What is a judicial debt restructuring agreement?). It should be noted that the cantons of Neuchâtel, Fribourg and Vaud have a public bail-out fund.
A restructuring budget is a schedule of the debtor's monthly income and the money that the debtor and their family require to live on each month (expenses). The restructuring budget is individual to the debtor and relates to the actual situation of the debtor and their family. The expenses are deducted from the income. The remaining money, if any, is the budget surplus.
A basic amount for food, clothes, body care, pets etc. is included in the restructuring budget (as for the minimum subsistence level under debt collection law / see: Debt enforcement/distraint). The restructuring budget also takes account of rent and ancillary costs, health insurance premiums, the cost of travelling to work and meals taken outside the home while working. If the debtor needs a car, the expenses should include the cost of car insurance, car tax, an amount for repairs and other car-related costs. Any alimony payments and childcare costs must also be included in the restructuring budget. In addition, current taxes are included in the restructuring budget, as well as a sum of money for existing or future healthcare costs (the deductible/excess payable to the health insurance fund, costs of dental treatment etc.). The restructuring budget must be calculated so as to ensure that the debtor can pay their own living expenses and those of their family without incurring further debts. An additional amount should therefore be included in the restructuring budget to cover unexpected future expenses.
The law does not prescribe how much the creditors should be paid in a debt restructuring process. The creditors decide whether they agree with the payment offer or not. The amount that can be offered to them is determined by the amount owed, the restructuring budget, the restructuring period and/or the assets available. In any case, a debt restructuring process should not last longer than 36 months.
Guidelines of the Swiss Debt Counselling Association (PDF) (only available in German)
In this case, the budget surplus is therefore multiplied by 36. Either 100% of the debts can be paid off in instalments using the budget surplus, or the creditors are asked to waive part of their claim. This would mean, for example, that 50% of the debts are paid back in instalments and the remainder (50%) are no longer owed or the creditors abandon their remaining claims. If the debtor has assets (e.g. through an inheritance) but these are not sufficient to pay off all the debts, an agreement may be reached with the creditors to the effect that only part of the debts are repaid and the creditors waive their claim to the remainder of the debts.
In principle, yes. During the debt restructuring process, it is important that the debtor negotiates with all the creditors and treats them all equally. If one creditor is treated differently, the other creditors must be informed of this.
However, the law allows certain creditors (known as privileged creditors) to be exempted from equal treatment. These include health insurance premiums and alimony claims for the last six months and contributions to the old age and survivors’, disability, accident, unemployment and loss of earnings insurance schemes. By law, these creditors receive 100% of their claims.
Fines and financial penalties resulting from criminal proceedings are also exempt from equal treatment. These have to be paid in full. It is not possible to pay them only in part, because they can be converted into a prison sentence in the event of non-payment.
(Legal basis: Art. 219 para. 4 Federal Act on Debt Enforcement and Bankruptcy (DEBA), Art. 36 and 106 Swiss Criminal Code (SCC)).
A debt restructuring process can be conducted without going to court. It is then known as an extra-judicial debt restructuring agreement. The other possibilities are an amicable debt settlement and a judicial debt restructuring agreement. Both these debt restructuring processes involve the court.
For an extra-judicial debt restructuring agreement or an amicable debt settlement, all the creditors must agree with the payment offer. A judicial debt restructuring agreement is the only process which does not require all the creditors to agree with the offer.
In this debt restructuring procedure, contact is made directly with the creditors. During what is known as a moratorium, the creditors are asked not to enforce their claims or conduct debt collection proceedings for a certain period (e.g. 3 months), so that an overview of the financial and personal circumstances can be gained and a restructuring budget drawn up (see: What is a restructuring budget?). If there is a budget surplus and/or the debtor has assets, the debtor makes the creditors an offer, stating how much he or she can pay (see: How much must I pay the creditors? and Do all the creditors receive the same amount?). The creditors can accept or decline the offer. All the creditors must agree to the offer before the extra-judicial debt restructuring agreement can take place. It should also be noted that if debt collection proceedings are already in progress, it may make sense to reach an amicable debt settlement.
An amicable debt settlement means that the moratorium (that is, the period during which the claims cannot be enforced) is submitted to the court. This will incur court costs, though. However, if the court approves the moratorium, any ongoing debt collection proceedings are halted and no new proceedings may be launched while the moratorium is in force. This does not apply to alimony payments since these can continue to be enforced. The moratorium can last for a maximum of six months. In addition, the court appoints an administrator to conduct the debt restructuring proceedings. In other respects, the debt restructuring process is carried out in the same way as an extra-judicial debt restructuring agreement (see: What is an extra-judicial debt restructuring agreement?). The debtor or the administrator makes an offer and all the creditors must accept the offer before the debt restructuring process can take place.
(Legal basis: Art. 333 ff., DEBA)
If not all the creditors agree to a restructuring proposal, the debtor has the option of what is known as a judicial debt restructuring agreement. The debtor must go to court for this kind of debt restructuring, and court costs will be incurred. The court then makes a decision regarding the moratorium (that is, the period during which the claims cannot be enforced). If the court approves the moratorium, any ongoing debt collection proceedings are halted and no new proceedings may be launched while the moratorium is in force. The court also makes a decision on the debt restructuring agreement itself, and the latter only comes into force if the court confirms the agreement. It is a prerequisite that 51% of the creditors with at least 2/3 of the total amount of the claims, or 25% of the creditors with 3/4 of the total amount of the claims, must agree to the debt restructuring agreement. Furthermore, the offer must be proportionate to the restructuring budget. If the court confirms the debt restructuring agreement, the agreement applies to all the creditors, including those who rejected the offer. An administrator is also appointed to conduct the debt restructuring proceedings in this type of procedure. If the judicial debt restructuring agreement does not come into force, bankruptcy proceedings are automatically initiated against the debtor (see: Private bankruptcy).
(Legal basis: Art. 293 ff., DEBA)
The debt enforcement proceedings and loss certificates (see: Debt enforcement/distraint) are entered in a register maintained by the debt enforcement office.
There is no legal entitlement to deletion of a debt enforcement entry after the debtor has settled the claim. Before the claim is settled, it should therefore be agreed with the creditors that they will withdraw the debt enforcement proceedings and have them deleted from the debt enforcement register free of charge at the end of the debt restructuring process.
In order for loss certificates to be deleted from the register, they must have been paid or have expired. The debtor is therefore legally entitled to have the loss certificates deleted from the register after a debt restructuring process. In order to achieve this, the debtor must prove to the debt enforcement office that the amount agreed with the creditors has been paid. This can sometimes create problems. We therefore recommend that before paying the loss certificates, the debtor agrees with the creditors in writing that the creditors will give receipts for the loss certificates after payment and return the originals to the debtor or the debt enforcement office free of charge.
(Legal basis: Art. 149a para. 3 DEBA and Art. 265 para. 2 DEBA)
We recommend that you contact a reputable debt counselling service if you intend to seek debt restructuring. Under Find a counselling service near you, you can enter your home postcode and find a reputable debt counselling service in your area. These debt counselling services are members of the Dachverband der Schuldenberatung Schweiz (Swiss Debt Counselling Association).