The term over-indebtedness is used when someone no longer has sufficient resources to cope with the financial obligations accumulated. The reasons for it are varied – illness, job loss, poor budget management, a change in family circumstances – but all give rise to one and the same feeling: the anxiety that comes with bills piling up. In Belgium, the people who find themselves in this position are able to seek help from professionals: debt mediators.

In May 2022, Eurostat reported an increase in annual price inflation of over seven per cent at the end of April in the eurozone. This record level has enormous consequences for household budgets, especially the rise in the costs of raw materials and energy. Again according to the latest Eurostat research, the cost of electricity in Belgium has risen by 50 per cent since last year and the cost of domestic heating oil by almost 95 per cent. If we add to this the economic impact of the two-year global pandemic, the risks of households finding themselves over-indebted are very real.

In the 1990s, European countries decided to create provisions to allow over-indebted individuals to request a debt settlement plan. Denmark was the first, in 1984, followed by France, in 1989, with the Neiertz law, which introduced departmental commissions to examine the over-indebtedness of individuals, with a view to encouraging amicable settlements and to take pressure off the courts.

It was in 1998 that Belgium decided to regulate the collective settlement of debts and introduced the post of debt mediator. The mediator’s role is to set up a debt settlement plan by re-establishing the dialogue between the debtor and creditors. It is essential, therefore, that the mediator be impartial and independent of the parties concerned.

Free support

Nathalie Carré and Marie Warnier run the debt mediation service at the CPAS in the city of Andenne, in the province of Namur. They have been colleagues and friends for 20 years and are both social workers. This is one of the few professions allowed to practice as debt mediators, along with lawyers, ministerial officers and judicial representatives. To be officially admitted to the profession, they had to complete a ten-day training course.

“Any individual who has at least one debt can contact us. It’s a free service,” says Carré. Maryse, a 53-year-old self-employed woman, used the debt mediation service in 2012. She tells us: “I had a café that was doing very well until the smoking ban law was passed. I lost half of my customers. I had less money coming in, but my fixed costs weren’t going down. Even though I was working 80 hours a week, I couldn’t make ends meet. I also had two children to care for. I was being squeezed from all sides, so I filed for bankruptcy. With the legendary slowness of the Belgian administration, I had to wait a year before the ruling on my bankruptcy was pronounced and 14 months before I received my unemployment benefit. And during all that time, I had a bailiff knocking on my door every day.”

“I was afraid of waking up in the morning because I didn’t know who would be knocking on my door. I was overwhelmed by debt. That’s when I phoned a debt mediator and told her I couldn’t cope anymore.”

When, like Maryse, you start the debt mediation process, the first step is to fill in a form on which you list your resources and fixed monthly outgoings, and the amounts owed to creditors. Creditors are all persons, establishments or institutions to whom money is owed. Even personal debts (money owed to a relative, for example) have to be included. It is a time-consuming but necessary step towards establishing a clearer picture of the situation and the strategy to be taken. “It is very important to list the original creditor, not the intermediary. Some people receive letters from different bailiffs from the same office and don’t even know which credit it refers to. But in the event of legal proceedings, we have to notify each original creditor of the plan, not the intermediaries [editor’s note: bailiffs],” adds Warnier.

Carré and Warnier use this summary sheet to draw up a debt settlement plan that has to be validated by each of the creditors. In Belgium, the law provides for two courses of action: the amicable procedure, which is not binding, and collective debt settlement. The two procedures have the same objective: to redress the debtors’ financial situation while ensuring that they and their families can continue to live with human dignity.

Unlike amicable settlements, collective debt settlement is a legal procedure with a stricter framework, including the freezing of costs and interest throughout the process and the suspension of seizures. Unfortunately, this principle does not apply to amicable mediation, explains Warnier, who always tries to encourage this type of settlement. “In an ideal world, this freeze would also be applicable in amicable settlements. I sincerely believe that it would save us from having to resort to collective debt settlement, which is a very onerous legal procedure, not because an amicable plan is impossible, but because people are under pressure. I can’t draw up a budget when the person I am mediating with comes back to me and says that their furniture has been seized. It’s just not possible.”

“After a few weeks, my mediator called to tell me that I didn’t have to worry anymore,” says Maryse, who was officially able to clear her debts after five years of mediation.

During the whole procedure, she had several back-breaking jobs and did not emerge unscathed from the ordeal. “Debt mediation made me feel safer in the sense that I no longer had bailiffs knocking on my door but I was still under daily pressure, with my mediator asking me to provide her with so much paperwork, to sign so many agreements and constantly asking me where I was in my job search. There are pros and cons to mediation. In my case it was a good thing, because I had come to a point in my life where I was really thinking of taking my children in my arms and leaving everything behind.”

“We still have to keep up the preventive work with the public. We need to break the taboo surrounding money, to talk about it in families, in schools. And why not include a course on budget management as part of all studies? That would be really useful,” insists Warnier.

Despite the challenges of the job, which brings them face to face with great human distress, the two women have not lost their good spirits and the passion that drives them. When asked about the difficult aspects of the work, they struggle to find answers. After a few moments, Marie says, “What’s hard is to see people you’ve helped come back. It’s difficult because it puts your role and your usefulness into question. And then there are all those people you see struggling to get by, who are really doing their best and for whom it doesn’t work, because the cost of living is increasing, for example.”

Figures on over-indebtedness in Europe

At present, it is difficult to obtain an accurate count of the number of over-indebted households. Statistical agencies therefore have to look at a range of indicators which, when put together, give a picture of the level of over-indebtedness in a country. The harmonisation of data within the European Union also continues to be a complicated task, given the differences in legislation. European laws regulating ‘easy’ but risky consumer credit does, however, seem to have had a positive impact in recent years on the number of households becoming over-indebted.

The Belgian Credit and Debt Observatory has analysed the figures in the report for the year 2021 of the Central Consumer Credit Office (CCP) of the National Bank of Belgium (BNB) and points to a slight fall in credit defaults, as well as a reduction in the number of cases admitted to the collective debt settlement procedure. The report does not provide a typological survey, but it does show that the age group most affected is the 35-44 age bracket, regardless of gender. More than 74,000 people are undergoing collective debt settlement procedures, a number that has been declining over the past six years.

Surprisingly, perhaps, the health crisis and its side effects have not led to a spike in over-indebtedness in Belgium, nor in France or Germany, which may be due to the temporary deferral of payments granted by some creditors in the context of the Covid-19 crisis and to a reduction in household spending during the lockdowns. An increase is, however, feared by experts from the sector for 2022 and the years to follow.