Growing number of over-45s involved in debt restructuring procedures

25/03/2015 15:00

More and more individuals aged 45 and older are involved in debt restructuring procedures, whereas the number of under-45s involved in debt restructuring procedures is declining. Divorce and loss of income are the two most common reasons why people are admitted in court-ordered debt repayment schemes. Older age categories more often than younger people have to deal with this situation, as Statistics Netherlands announced today.

Altogether, 12.3 thousand private individuals and self-employed were admitted to debt repayment schemes in 2014, i.e. a decline by 1 percent on an annual basis. With more than 3.5 thousand people, the age category 45-54 accounted for 29 percent of all new restructured debts, versus 18 percent in 2002. With 30 percent, 35 to 44-year-olds constitute the largest group. The share of 55 to 64-year-olds is much smaller, although it has doubled from 7 percent in 2002 to 14 percent in 2014. In the two age groups under 35, the total share fell from more than 40 percent in 2002 to 23 percent in 2014.

Due to ageing of the population, the group of people older than 45 has grown since 2002. Yet, ageing of the population does not entirely account for the increase in debt restructuring arrangements in this age category. The share of 45 to 54-year-olds engaged in debt restructuring schemes has grown more rapidly between 2002 and 2014 than the share of people in the 45-54 age category. Statistics Netherlands reported earlier that this age group is having a hard time. Unemployment is still rising and a disproportional part of long-term unemployed belong to this age category.

Decline for third consecutive year

The number of people admitted to debt restructuring arrangements declined for the third consecutive year in 2014. In 2013, the trend was already downwards (nearly 7 percent) compared to the preceding year. Apart from economic factors, the number of debt restructuring schemes was also affected by changes in legislation.

Since 2012, people first have to appeal to the authorities in their municipality of residence, the so-called out-of-court procedure, prior to being admitted to a court-ordered debt restructuring procedure. Municipal authorities set the admission requirements. In general, the criteria for admission to debt restructuring schemes have become stricter in recent years. As a result, fewer people will end up in court-ordered debt restructuring schemes. There are various alternatives, like putting people with problematic debts under tight control at an early stage. Because in such cases, the debt is not settled, admission to a regular debt restructuring procedure is in fact not possible.

Fewer (ex-)self-employed

Last year, 9.9 thousand private individuals and 2.4 thousand self-employed were admitted to court-ordered  debt restructuring schemes. Compared to last year, there was a decline by 8 percent among (ex-)self-employed. This has to do with the number of bankruptcies of natural persons running one-man businesses. A growth by more than 1 percent was recorded among private individuals. As a result, the downward trend in the number of debt restructuring schemes in this category has come to an end. Loss of income is the main reason for people to become involved in debt restructuring procedures.

More people debt-free

By the end of last year, 39 thousand people were involved in debt restructuring procedures, i.e. 2 percent down from the same period in 2013. More than 13 thousand completed the entire procedure last year. Four in five ended with a so-called clean slate, i.e. the court decided that the remaining part of the debt is no longer claimable. In 2013, 75 percent were debt-free after the procedure was concluded. A small part is concluded because debtor and creditor come to an agreement or because the debtor is declared bankrupt. In nearly 15 percent of cases, the debt settlement failed or was terminated for other reasons, for example, if the debtor received a legacy. The corresponding figure for the preceding year was nearly 20 percent.