Rules related to personal bankruptcy in Switzerland are tough compared to many countries. In effect, they give heavily indebted individuals breathing space rather than a clean slate. This week, Switzerland’s government put forward a plan to soften the rules.
To initiate personal bankruptcy proceedings (technically insolvency proceedings) in Switzerland requires funds of around CHF 5,000 to cover the costs of the court and other agencies to restructure repayments. If the court accepts the application it restructures debts and gives the creditors involved loss certificates, documents which give creditors the option of claiming the money owed to them if the debtor’s situation improves, in effect buying the individual time rather than relieving them of debt.
On 3 June 2022, the Federal Council put forward a plan to relieve bankrupt individuals of some of their debts rather than merely restructuring them.
For those with a regular income the new rules would simplify the process of getting creditors to agree to a repayment haircut. A debt haircut would be imposed on all creditors if a majority agree.
For those without a regular salary any balance owed after liquidating and distributing the proceeds for the sale of their assets would be wiped after 4 years if the individual can prove they have worked hard to find regular work.
A key aim of the change is to get people out of financial difficulty, back into a healthy productive life and reduce their burden on social services.