The amicable settlement: for entrepreneurs with debts

What is the amicable settlement?

The amicable process is a voluntary debt settlement. First, you investigate whether you can solve your problems yourself. Then you make agreements with your creditors to repay as much of your debts as possible within 18 months. You do this without the involvement of the court. Your local authority or a specialised debt assistance organisation will help you with this.

Who can use the amicable settlement (Msnp)?

The amicable process is officially called  the minnelijke schuldenregeling natuurlijke personen (amicable debt settlement for natural persons, Msnp). The scheme is intended for natural persons (individuals). These are the following entrepreneurs:

• owners of a eenmanszaak
• partners in a VOF, partners in a maatschap and managing partners in a CV
• managing directors and major shareholders (DGAs) who are experiencing private difficulties due to their business

The Msnp does not apply to debts of legal entities, such as a BV (private limited company), NV (public limited company), vereniging (association), or stichting (foundation). For a legal entity with debts, you can try to reach mutual agreements with creditors, use the WHOA, or apply for a moratorium on payments.

How much time does the amicable settlement take?

The programme lasts 18 months. If you comply with all the rules during that period, you will usually not have to repay the rest of your debt. You will make agreements about this at the start of the programme.

How does the amicable settlement work?

Sometimes, an accountant or business coach can help you get out of financial trouble. If this does not work, you will need special assistance. You can register with the municipality or a debt counselling agency. Under the Municipal Debt Assistance Act (Wgs, in Dutch), the municipality is required to provide debt assistance to individuals and businesses with problematic debts. It is problematic if you can no longer pay your business and private bills. And if creditors threaten to seize your house or goods or to file for bankruptcy. If you choose a commercial debt counsellor, you will have to pay the costs yourself. If you go to the municipality, they will usually pay the costs for you.

Intake and action plan

After registering with the municipality or debt counsellor, you will have an intake interview. The municipality usually engages a specialist organisation for this. During this interview, you will indicate how much debt you have, who your creditors are, and together you will determine which approach best suits your situation. Does the debt overview show that your business is not viable? Then it is better to close your business.

Together with the municipality or debt counselling agency, you will draw up an action plan. It often takes 6 months to a year before all agreements with creditors are finalised and you can start repaying or paying your creditors. Your situation will determine what kind of help is available to you.

Amicable settlement

The debt counsellor will examine how much of your debts you can repay and make arrangements with you and your creditors. Usually, a period of 18 months is agreed upon. During that period, part of your income will go to your creditors. You will receive a weekly amount to pay your fixed expenses and to live on.

The debt counsellor will propose to the creditors that the remainder of the debts be written off after those 18 months. If all creditors agree to the arrangements, an amicable agreement is reached and you can start making repayments. If you continue to run your business, the money for the repayments will come from your business profits. Are you closing your business? Then you will need to find another source of income, for example by working as an employee.

Restructuring credit

Does the debt overview show that your business is viable and that sufficient income can be expected? If so, you may be able to obtain a restructuring loan from the municipality. This means you borrow money from the municipality. The amount of the loan is based on the amount you can repay with interest within the agreed period. The amount of the loan is used to make a proposal to all creditors to buy off the claims and write off the remainder. If this is successful, you can continue to do business and repay your debt to the municipality.

Compulsory settlement with creditors

There is a chance that one or more creditors will not cooperate with the debt counsellor's proposal. They are not obliged to cooperate. They may not want to come to an agreement with you, or they may find the amount offered or the repayment too low.

In this situation, you can submit a request to the court to force unwilling creditors to participate. That is called a compulsory settlement. The judge assesses whether the refusing creditors have good reasons to reject the proposal. If their reasons are not good enough, the judge can decide that unwilling creditors must agree to the proposal and the process can start. A compulsory settlement can only be imposed if most of the creditors have agreed.

What to do if the amicable settlement does not work out?

Is an amicable settlement not successful and does the judge not grant a compulsory settlement either? Then you can ask the court (in Dutch) to admit you to legal debt restructuring: the Wsnp. This is also possible if you have a statement from experts or the municipality that an amicable settlement is not likely to succeed. Because, for example, there is no chance to convince the creditors. In most cases you must end your business if you are admitted to the Wsnp.

Help in solving debts

Are you looking for ways to solve your debts? Use the Dealing with debts step-by-step plan. Or contact the KVK Advice Team: 088 585 22 22.