Many of the 81,000 households whose over-indebtedness was accepted last year dreamed of having it canceled. They were right because the process is common: 27% of the total debt was canceled by commissions and courts. This procedure is generally reserved for the most desperate cases, and there are many of them.
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€1.8 billion of debt has been erased
Last year, 143,080 households filed an over-indebtedness case, as reported by the Bank of France in its annual typological survey. Some were rejected, others were placed in personal repair. Some of the latter were able to benefit from a new distribution of their repayments.
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In all, the members of the over-indebtedness commissions had to settle disputes amounting to €6.06 billion of outstanding debts. In some cases, they found that credits had been opened to pay other credits. Courts have the power to cancel these uncollectible debts, and they did not hesitate to do so.
In 2019, debt cancellation represented 26.6% of the total unpaid amount, or €1.8 billion. A relief for households that can no longer meet their repayments and an incentive for 2020.
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Over the past two years, the over-indebtedness commission has had the right to erase debts without resorting to a court. Although creditors have the means to appeal to contest the decision, this is an additional step towards protecting the borrower.
For your information: in October 2020, the French filed 10,083 over-indebtedness cases. This is more than the 10,025 in September, and the number of filings is expected to rise as the effects of the lockdown are felt. In October, the commissions managed to find personal recovery measures without judicial liquidation for 3,850 households.
Revolving credits related to over-indebtedness
Figures from the Bank of France show that 62.2% of over-indebtedness cases involve revolving loans. This cash flow has the advantage of being available again with each capital repayment. It is easy to obtain because it is customary for distributors to check the borrower’s financial situation very little.
In return, revolving credit is expensive, especially when provided by specialized companies. Ultimately, over-indebtedness files include 2 revolving debts, with a median amount of €5,927.
Courts tend to emphasize the responsibility of financial institutions that granted credits to provide other credits to financially troubled households. No official figures are available, but it is possible that many revolving loans are included in the cancellation of 27% of the debt.
What to do when debt cancellation is impossible?
Those for whom the over-indebtedness commissions will pronounce debt cancellation in 2020 do not have the most enviable situations. Because in 27% of cases, they are single men, compared to 22% for isolated women.
There are 25% of unemployed individuals among the over-indebted, but especially nearly 40% are inactive. Almost half of them have no repayment capacity, while 83% have wealth of less than €2,000.
Some will find themselves in these descriptions, but their over-indebtedness file has been rejected, and therefore they have no chance of obtaining debt cancellation.
However, this means that their financial situation allows for credit restructuring by a specialized company. In this transaction, the buyer pays the capital and late interest to the creditors themselves. Then, their client reimburses them with a single maturity, the amount of which is adapted to their resources.
According to figures from the Bank of France, in cases of over-indebtedness, the median consumer debt reached €12,188. The unpaid capital on the mortgage loan amounts to €105,021, with €48,924 remaining after the sale of the primary residence.
among them have no repayment capacity, while 83% have wealth of less than €2,000.
Some will find themselves in these descriptions, but their over-indebtedness file has been rejected, and therefore they have no chance of obtaining debt cancellation.
However, this means that their financial situation allows for credit restructuring by a specialized company. In this transaction, the buyer pays the capital and late interest to the creditors themselves. Then, their client reimburses them with a single maturity, the amount of which is adapted to their resources.
According to figures from the Bank of France, in cases of over-indebtedness, the median consumer debt reached €12,188. The unpaid capital on the mortgage loan amounts to €105,021, with €48,924 remaining after the sale of the value.