In the event of the final discharge of debts, it is true that you are debt-free after the debt settlement. This means that you go into debt counseling. This is possible both in a voluntary process and in a legal process. In both cases, a third party contacts the creditors. The latter tries to make a payment arrangement with the counterparties. The intention in both cases is that you are debt-free after three years.
The third party looks at what is feasible and contacts the creditors. It is possible that it is not realistic to expect that all debts will be paid off in the three years. In that case they propose to the creditors to settle for a lower amount, a certain percentage of the entire debt. The creditors then agree that this lower amount of the debt is paid off and that the remaining amount of this debt is waived. This is only possible if both parties agree. The Central Judicial Collection Agency and the Education Executive Agency never agree to discharge debts. With these organizations you will simply have to pay off the debts in full.
Difference between voluntary debt assistance and legal debt assistance
With the legal debt relief, the amount of the debt is paid to the creditors in one go. Your debt becomes three transferred to a lender for a year so that you only have to deal with one creditor. With the voluntary debt restructuring (amicable settlement), the debt is repaid in installments. Every month, the creditors receive a part of the amount due until the three-year period has expired. If you do not meet your monthly term in those three years, the creditor is free to cancel the arrangement. You have not adhered to your part of the agreement, so they are no longer obliged to adhere to their part of the agreement. They can therefore decide not to grant you a final discharge and to reclaim the entire amount.
Which creditors are the first to be eligible for a final discharge request?
When you have many different creditors, the competing debts are the first to be considered for final discharge. These are the mail order companies and the red is at the bank. When there are also preferential debts (tenants, mortgage, insurance, energy companies, social service, justice, taxes) they quickly settle for only a part of the debt under the motto “Rather something than nothing”. Debts with government institutions always come first. These are often not eligible for discharge, but under certain circumstances it is possible to get partial cancellation from the energy company, the housing association or the insurance company.
Both during the legal debt restructuring process and during the amicable settlement process, you live as a debtor of an absolute subsistence minimum. The remaining income goes to the creditors. So after 36 months (so 3 years) you are completely debt-free and you can start with a clean slate again.
Arrange your own debts
If you want to make payment agreements with creditors yourself, it is important to communicate well. You will have to be open and put all your debts on the table. You will also have to provide insight into your income and the creditors must make a payment proposal. Here too, it is best to keep a term of three years in which you want to have all debts repaid. Some creditors will agree in this way with final discharge, but with the help of a debt counseling process you will be stronger in that regard. The waiting times for a debt counseling process differ per municipality and can vary from no waiting time to up to 16 months.