Overindebted people in Switzerland will soon be able to wipe out their debts by declaring bankruptcy. Parliament has approved a government-backed reform aimed at breaking the cycle of indebtedness, after the lower house resolved the final disagreements on Thursday, reported RTS.
Under the new rules, the heavily indebted will be eligible to have their debts cancelled after three years, provided they live on a subsistence income and hand the remainder of their earnings to creditors. For a single person, the minimum living allowance is set at CHF 1,200 a month.
Applicants will have to prove they are making a genuine effort to restore their finances. Bankruptcy under the scheme will be permitted only once in a lifetime—a restriction added by parliament to prevent abuse.
Funds recovered during the process will first be used to repay tax debts, which are often the largest source of unpaid liabilities.
Lawmakers also tightened the rules governing inheritances and windfall gains. The Federal Council had proposed that such income remain claimable for five years after bankruptcy proceedings ended. Parliament extended the period to 20 years, against the wishes of the government and the left, which argued that the measure would create excessive bureaucracy for only a handful of cases.
The Swiss People’s Party (UDC/SVP), along with some lawmakers from the PLR/FDP and the Centre, opposed the reform, arguing that it unfairly disadvantaged creditors. Their efforts to slow the legislation largely failed.
Most of parliament considered the package balanced. The reform gives thousands of people a chance to escape debt, said Beat Jans, Switzerland’s justice minister. It offers them a real opportunity to improve their lives. The number of people struggling with excessive debt in Switzerland has risen sharply since the covid-19 pandemic.
The revised law also creates an alternative to bankruptcy. Debtors will be able to negotiate a partial write-off of their liabilities if a majority of creditors agree. Any settlement must then be approved by a judge. That part of the reform attracted little opposition during parliamentary debates.
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