Icelandic Bill on Debt Adjustment Proposed Skip to content

Icelandic Bill on Debt Adjustment Proposed

A bill on debt adjustment is likely to be put before Iceland’s Althingi parliament next winter. The bill is meant to assist individuals who carry heavy debt and have trouble paying their bills. This type of debt relief is already practiced in the other Nordic countries.

According to Jón Thór Sturluson, assistant to Minister of Commerce Björgvin G. Sigurdsson, the minister is keen on establishing such laws and the matter is currently being discussed with interested parties, Morgunbladid reports.

Payment adjustment would enable the authorities to decrease or cancel an individual’s debt,despite claims made by the likes of banks or other loan institutes.

In this way the program would give debtors the right to retain a certain minimum amount of their salaries to support themselves regardless of what they owe.

The purpose is for those who already carry heavy debt to be able to improve their situation and lead a fairly normal life, while at the same time paying off as much of their debt as realistically possible.

It is currently difficult for Icelandic residents to obtain long-term loans with reasonable interest rates and Iceland’s Central Bank has predicted a 30 percent collapse in real estate value over the next two years. Therefore many individuals who invested in property in the last few years could run into trouble.

According to Morgunbladid, in 2004 and the following years Icelandic banks and authorities encouraged the public to invest in real estate when obtaining long-term loans was easier. But people were not warned that they could run into difficulties later on. Laws on debt adjustment could therefore help these individuals.

Iceland is the only Nordic country that doesn’t have laws on debt adjustment; Denmark established such laws in 1984, Norway and Finland in 1993 and Sweden in 1994.

A bill on debt adjustment has, however, been submitted to Iceland’s parliament before; Minister of Social Affairs Jóhanna Sigurdardóttir submitted such a bill numerous times between 1998 and 2007 but it was dismissed in every instance.

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