Debt arrangement for private persons

Even though the debt arrangement is intended to be used as a solution for the problems of private households, even self-employed debtors may be granted such a debt arrangement.

The line between paid work and entrepreneur-like operations has dimmed, and ever more people work on the borderline. Many people are self-employed and offer their work simultaneously to several employers. These kinds of business operations may be characterised by the small amount of debts related to the operations and available funding.

In this case, the assets usually consist of the necessary tools and equipment protected through a stay of enforcement. If the debts accrued to such a self-employed person are mainly related to his or her private household, there are no grounds to treat the debtor differently from a private employee.

The self-employed persons referred to in the Act on the Adjustment of the Debts of a Private Individual (Laki yksityishenkilön velkajärjestelystä, no. 57 of 1993) include:

  • a private entrepreneur or self-employed person,
  • a partner in a general partnership and general partner in a limited partnership, and
  • a shareholder in the management of a limited liability company.

In operations observing a company format, an entrepreneur refers to a person with an active and significant role both as the owner of the company and in its everyday operations. The CEO or a shareholding member of the board in a public company is not considered an entrepreneur within the scope of the Act on the Adjustment of the Debts of a Private Individual.

A debt arrangement can be granted to an entrepreneur whose financial problems are only related to their private life. Debts from previous business operations that have ended are considered private debts. A debtor engaged in business operations may not have such financial problems related to their business operations that warrant corporate reorganisation.

The operations may be profitable and may be a better or the only alternative source of income for the debtor. For the creditors, it may be more profitable that the person is able to continue his or her business operations and use the income to pay his or her private debts than to terminate the business operations, in which case the funds acquired from selling the related property may be primarily used to satisfy the corporate creditors and leave the debtor unemployed. In these cases, the debt arrangement is only applicable to private debts.

The debts related to the business operations are excluded from the debt arrangement.

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