The amicable route and the Wsnp, the statutory route, are regulated by different laws. Partly as a result, these regulations do not always mesh well with each other. In practice, we often see that certain matters in the amicable procedure are handled quite flexibly or that certain matters are not considered. In the Wsnp the belt has to be tightened and debtors are not always prepared for this. We would therefore like to offer five tips to make the transition from the amicable procedure to the Wsnp smoother.
New bank account due to settlement risk
Does someone have a problematic bank debt -for example, a residual debt after the sale of a house or a revolving credit - and does he or she bank with the same bank? With a view to possible admission to the Wsnp, it may be wise to open a bank account with another bank. At the moment a natural person is admitted to the Wsnp, the fixation principle applies: all debts existing at the moment of admission may no longer be paid but must be submitted for verification in the Wsnp. One of the exceptions to that principle is when set-off is possible. This is regulated in section 307 Fw: the person who is both creditor and debtor of the person in respect of whom the Wsnp has been pronounced is entitled to set off these claims - if both arose before the Wsnp ruling.
In that case, therefore, as of the date of applicationWsnp, the bank would be allowed to offset the positive balance in one account with a negative balance in another account held with the same bank. This is guaranteed to cause problems. Especially if the income has just been deposited, the Wsnp is pronounced, the bank proceeds to offset the negative balance and all the fixed expenses for that month still have to be paid. Incidentally, the positive bank balances present on the date of the Wsnp - insofar as the bank does not proceed to set-off - in principle fall into the estate. The Wsnp administrator will calculate which part of the available balance can be regarded as a "savings balance". In any case other than when the bank proceeds to set-off, the administrator will bear in mind that it cannot be the intention that new debts arise immediately because the fixed expenses of that month cannot be paid.
As long as there is no nullity, the debtor has a payment obligation.
Nil child support
Is the debtor divorced and child support needs to be paid? In that case, it may be wise to refer the debtor to the Legal Aid Office in order to initiate the request for nil child support. After the Wsnp has been pronounced, no correction is usually included in the calculation of the release amount (vtlb). Only in exceptional cases - think in particular of the situation where the financial position of the parents together is such that there is an urgent shortage to meet the needs of the children - is there room for such a correction. In all other cases, the interest of the creditors should prevail. In our experience, such a correction is rarely, if ever, granted. As long as there is no nullity, the debtor has an obligation to pay. And note: from his vtlb, i.e. without a correction being included. The vtlb will usually not be so large that this obligation can actually be paid from the vtlb. The risk of new debts arising quickly is therefore high. If the nil adjustment is a fact before the Wsnp is pronounced, this risk no longer exists.
Statement no private use of car
Is the debtor employed and is there a lease car from the employer? The "company car" is a tricky issue in the Wsnp. If there is a lease car, the debtor must submit a statement 'no private use of car' to the Tax Authorities no later than January 1 of the following calendar year. The debtor may not drive more than 500 kilometers privately as of that new calendar year and must keep accurate mileage records for the Tax Office. There will no longer be an additional taxable benefit from that moment on. As long as this still exists, the benefit from the private use of the car will still be taxed as wages. This usually leads to a substantial reduction in net wages and thus the remittance capacity.
The disadvantage suffered by the estate as a result of this reduced remittance capacity must be compensated to the estate by the debtor. The amounts involved will soon be substantial, especially if the Wsnp is pronounced at the beginning of the year and the fiscal addition therefore only becomes void as of the following calendar year. Such amounts will not be easily met with a monthly repayment from the vtlb or via the vacation pay to be retained, as the vtlb report suggests. A contribution by a third party or possible extension of the arrangement, in consultation with the bankruptcy judge, is also among the possibilities. This, of course, is not desirable. It is therefore advisable to have the debtor apply for the statement "no private use of car" before the end of the year, if it looks like the Wsnp will be pronounced.
In the Wsnp, the administrator will assess whether the home
should be sold.
Own home no problem
Does the debtor own a home? It is not necessary to sell it before debt assistance is offered or a Wsnp request is made. Nevertheless, it regularly happens that we hear during a home visit that an amicable process was not started for a long time or that the home had to be sold before that happened. We suspect that the idea prevails that a mortgage loan should definitely be considered a debt and that it should be included in the amicable or legal trajectory. However, if there is no arrears in the monthly payment obligation to the mortgage provider OR the mortgage provider does not benefit from the sale, in some cases the sale will be able to fail. The crux is that it must be established that the debtor is meeting and can continue to meet the mortgage payment obligation. In the Wsnp, the administrator will then assess whether the house should be sold. That assessment is always customized, weighing the interests of all parties involved. Roughly speaking, three situations are possible:
- In case of a decent excess value, the home is sold so that the amount of the excess value benefits the joint creditors.
- In case of a considerable undervalue, the administrator will usually suggest selling. After all, if the house is not sold during the Wsnp, this dormant residual debt is not covered by the clean slate. The question then arises as to how sustainable this clean slate really is. It regularly happens that the debtor nevertheless does not want to sell the house. In that case the Wsnp administrator informs the debtor about the risks and consequences, after which the debtor will be asked to accept these risks and consequences in writing.
- The moment there is no substantial under- or overvalue, and thus the value is about as high as the mortgage loan, the sale of the home can be waived.
Certainly if there are no arrears in monthly payment obligations, those obligations are not exorbitantly high and the mortgage provider does not directly push for a sale, there are no objections to starting an amicable process. There are two other important issues here. First, in the Wsnp, only the mortgage interest paid is included in the vtlb calculation. Aflossing is capital accumulation and there is no room for that in the Wsnp. At most, one could still satisfy that aflossing from the vtlb. Secondly, it is important that the provisional tax refund is received monthly.
The new matrimonial property law
Was the debtor married on or after Jan. 1, 2018? If so, it is good to be extra vigilant. Before Jan. 1, 2018, marrying in community of property was the norm. As of Jan. 1, 2018, the Limited Community of Property Act came into effect. As a result, partners no longer marry in full community of property by default, but in limited community of property. It is also still possible to draw up prenuptial agreements or enter into a registered partnership since it came into effect.
The consequence of this modified standard is the creation of three assets. The assets are the balance of possessions and debts. The three assets are those of the two partners separately before the marriage and the joint assets as created from the moment of marriage. For the assets that the partners already had before the marriage, the rule is that they remain "sticking" to the person and do not fall into the community of property as a result of the marriage. In addition there are a number of assets and debts that, despite having arisen after the marriage, in principle remain the private property of one of the partners. These include inheritances, gifts, inheritance law acquisitions such as a legitimate portion, attached property and debts arising from these claims.
In practical terms, after finding that there are two married debtors who are applying for debt relief, the first thing you do is determine whether they were married before or after Jan. 1, 2018, if it was after Jan. 1, 2018 whether there is limited community or if there are prenuptial agreements. Next, you are going to allocate the assets to the right partner. After all, it is very important that each partner bears his private debt with his private assets and that, in addition, the debt arising in the community is borne by the community. With regard to liability, under the new legislation, both partners remain liable for debts arising during the marriage. The new legislation has also resulted in a change with regard to determining the possibility for creditors to recover assets. The most obvious change is that a creditor for a private debt of one partner can no longer recover from the entire community property but only from half of it.
In conclusion
Undoubtedly, there are more issues that you may wonder about. Consider, for example, an independent business owner who reports for debt relief. The national consultative body of bankruptcy and suspension of payments judges (Recofa) has developed a "guidebook" on self-employment in the Wsnp. We will be happy to tell you more about this in a subsequent article.
If, after reading this article, you still have questions about any of the issues raised, would like more in-depth content, or have other questions at the intersection of the amicable to the legal process, please do not hesitate to contact one of us us. In consultation, we are also happy to provide more plenary information within your organization on these or other related topics.
