In 2019, more than 6 % of the Swiss population is in a over-indebtedness. 80 % of them started accumulating debts before the age of 25. What's more, the situation can quickly become a vicious circle, as the debtor takes on debt to pay off previous debts. Here are 7 effective ways to pay off your debts.
1. Assess the situation
Before paying off your debts, you need to assess the extent of them. This will help you find an effective solution to the problem. The sources and beginnings of the problem are the first points to address. Your money problems may have something to do with your lack of knowledge of personal finance management, or with your lack of resources. Either way, this assessment is the most important step.
Many debtors feel ashamed of their debts to society. As a result, they shut themselves away and don't dare talk about it to those around them. However, it is possible to call on a cantonal advisory body. In fact, each canton has its own service dedicated to this type of situation.
2. Calling in a professional
A professional can help you draw up a debt-reduction plan averaging 36 months. He or she will begin by analyzing your financial situation. Your own analysis will be a great help, as you are the only one who knows the source of the problem and your actual situation. It will also enable him to find solutions tailored to your situation.
He can then ask for payment facilities. These are for debts that do not have a high interest rate and whose amount is also limited to a reasonable sum. The repayment plan will be spread over a maximum of 36 months.
Your advisor can also negotiate with your creditors, asking them to waive interest. Of course, a number of factors will be taken into account in the negotiations, such as compliance with due dates and monthly payments.
In the event of tax debts, he can also talk to the Tax Office to ask for payment facilities for your tax refund.
3. Consolidate your debts
If you have several creditors, it is very important to consolidate your debts. This enables you to make one monthly repayment to your bank and improve your relationship with your creditors. The principle of consolidation is simple: you take out a loan with your bank to pay off all your debts, so you only have to repay the loan on a monthly basis.
The advantage of consolidation is the possibility of benefiting from a relatively low rate, which will be of great help to you. As it's a loan, you'll need to present a solvent file to show your ability to repay, and you won't be able to take on any other debts during the payment period.
4. Control your budget
Controlling your budget is the key to good financial health. Your advisor can give you a number of tips to help you control your budget. In any case, the first step is to live below your means. To do this, you need to earn more than you spend. Of course, you can always put some money aside, but as your monthly debt repayment is already included in your expenses, you'll need to prioritize it. That way, you'll be able to adjust your lifestyle to what's left over, and you'll be able to avoid taking on more debt.
The advisor can also eliminate other expenses such as an insurance plan or leasing. The aim is to reduce your monthly expenses so that you can pay off your debts without cutting back.
5. Partial remission of debts
Partial remission of debts is also known as extrajudicial composition or judicial composition with remission (LP art.333 and SS). This is a legal document to be signed by both parties. It mainly concerns debtors with a high monthly income, but whose debt cannot be paid off for 3 years, otherwise the monthly payments will be too high.
The aim is to liquidate your debts over a 36-month period and offer your creditor a large sum of money to repay it. The creditor will then forgive the debt (or part of it).
6. Debt payment plan
The debt payment plan is also known as an out-of-court settlement without remission. This plan enables the debtor to repay his debts within 3 years. However, it must be borne in mind that all creditors must be treated equally. It is therefore possible to consolidate debts with this solution. Obviously, it is only suitable for debtors who have the means to repay their creditors within 36 months.
With this solution, you need to prepare a payment plan spread over 3 years. Creditors must be informed of the scheduled payment dates. Negotiations may be necessary if certain creditors ask to be given priority.
7. Declaring bankruptcy
If the debtor asserts that he will no longer be able to pay his debts, and that no negotiations with creditors have been successful. The debtor can then appear before a judge to request personal bankruptcy under Article 191 of the Federal Debt Collection and Bankruptcy Act. He must also prove that he has no means of repaying his debts. At the same time, he will have to make sure he pays all costs relating to the proceedings. He will no longer be able to apply for credit, and his valuable assets may be seized. This situation is referred to as a deed of default.
In conclusion:
There are many ways to pay off your debts. Each solution will depend on the nature and extent of your debts. They may also require the intervention of a third party, who will enable you to learn about all the solutions available to you and choose the one best suited to your situation.