Debt in Switzerland: In a debt dilemma? First steps to get rid of debt in Switzerland (part 3)

What were Goethe’s words in The Sorcerer’s Apprentice? «Spirits that I’ve cited, my commands ignore.» The famous ballad deals with overconfidence and a mess that has become hard to get out of. Of course, you can’t always link having debt with overconfidence – very few debtors shamelessly live the high life up until they crash – but when you’re indebted, you can find yourself feeling just like the poor apprentice who can’t get out of a mess without his master.
But there is help – and it’s much closer than you might think. This third and final part of our series on debt will show you ways out of debt chaos, as well as paths and possibilities for successful debt restructuring.

We live in a time where all things shiny are celebrated on Instagram, TikTok, and similar apps. People on social media orchestrate the appearance of perfection with a luxurious lifestyle, admired by others, suggesting that it’s easy and desirable for everybody to achieve. All these «beautiful people» quickly make admirers forget what reality actually looks like for at least 500’000 Swiss people: a lot less glittery, a lot more debt. According to the Swiss umbrella organisation for debt advice, this is an often-underestimated social problem. Getting rid of debt is not easy. If your goods are garnished, then you have to live with the absolute minimum, while the rest is taken through debt collection. Moreover, a big part of debt is borne by the cantons, because the law provides that they take over tax, health insurance and other debt, including oncost. A never-ending cycle.

Unless you happen to win the lottery, you unfortunately can’t just make your debt disappear, Houdini-style. The first insider tip when financial disaster strikes is early intervention: If you see that you’re heading straight towards a financial iceberg, you should seek professional help and create a plan to steer around it and overcome your debt. The chances of a successful solution increase enormously that way.
If it’s already too late and you’re running at a deficit, unable to pay your bills, you need to act fast. There are a few concrete things you can do and organisations you can contact.
Firstly, it’s advisable to judge your financial situation realistically. Get an overview of your budget. If you have a clear overview of your income and spending, you can continue by listing all your debts. Make sure to include mortgages, credit cards, loans, and all other kinds of liabilities. With this documented, turn to a debt adviser. Each canton has a non-profit organisation that offers individual consulting for free. Here you can find a list (in German and French) of the centres in each canton. By seeking help early and creating a structured plan to manage your debt, it’s possible to reduce the mountain of debt bit by bit and to build up a positive financial future.

First, debt advisers check if restoring your finances is even possible. To do so, they create a specific budget or a repayment plan. First, they analyse how much money is left after payment of monthly living expenses. They also check where the debtor could save some money (for example, car leasing, credit contracts, or unnecessary insurance) to pay off the debt quicker. A debt settlement plan can also include other measures, such as debt consolidation and renegotiation of terms of payment. Another component is regular review of the repayment plan. This way, progress can be tracked and changes can be made if necessary. It might come to light that the budget needs adjustment, an additional income source should be sought, or that the payment plans need to be renegotiated with the creditors.

Sometimes there is no way to avoid going the legal route to get on top of your debt. In Switzerland, you have a few different options, such as private debt settlement (an out-of-court settlement) or personal bankruptcy. With out-of-court settlements, you try to reach an agreement with your creditor on how to repay your debt without the need for official insolvency proceedings. This can include payment by instalments, a partial waiver of your debt, or debt refinancing. Often, a lawyer or debt adviser will mediate to ensure that both parties adhere to the agreement.
However, in Switzerland, as opposed to other countries, an out-of-court settlement doesn’t automatically lead to legal debt forgiveness. You’re still obligated to stick to the agreement and make the payment.
In some cases, it can make sense to declare personal bankruptcy in court, also known as «personal insolvency proceedings». By doing so, private citizens have the possibility to manage their debt when they are insolvent. First, you have to prove that you are insolvent and file a document at the debt enforcement office. You’ll need to make a detailed list of your assets and your debts. The debt enforcement office then checks your assets to decide whether you have something you could sell to help settle your debts. You can also submit a debt management plan, which details how you plan to settle your debt within an acceptable time period. This plan will then be discussed with creditors and can be accepted, rejected, or edited. If the plan is accepted, you have to make the agreed-upon payments. After all your debts are settled, the process will be over. Possible residual debt can be forgiven.
The benefit of this process is that enforcement by the debt enforcement office is pushed back and wage garnishments are paused, so the accrual of additional interest on unpaid debt can be avoided. Personal bankruptcy offers a small pit stop because it suspends the timeframe for debt payments.
However, it’s important to note that private sector insolvency proceedings are extremely complex in Switzerland, and there are financial and legal consequences attached. It’s advisable to turn to a lawyer who specialises in insolvency law or a debt adviser in order to receive comprehensive advice and to discuss the best options for your individual situation.

Just as you should not dig one hole in order to fill another, you should also be wary of commercial debt advisory services. Choosing the right partner to help you recover from debt is crucial. While there are many reputable debt advisers, commercial providers should be approached with caution. When a company offers to relieve you of all worries straightaway or even to take over your debts, red flags should be waving all over the place, because there is no such thing as instant debt relief. If you’re still considering an approach with a commercial debt advisory service, remember that these companies charge fees for their services. It is important to understand the cost structure before making a decision. Research the reputation and experience of the company and always read the fine print. The company should comply with any and all legal and regulatory requirements.

We’re definitely no experts on Chinese philosophy, but Confucius’s opinion on mistakes is just too apt not to use here: «A [person] who has committed a mistake and doesn’t correct it is committing another mistake.» During the debt relief process, you need to analyse and understand how you ended up in debt so that you don’t repeat those mistakes. Analyse and question your consumption behaviour, eliminate unnecessary spending, and recognise the potential for improvement. Only when you’ve identified the source of your money issues can you better understand what behaviours you should avoid and how to help yourself financially. Then you can gather more information on financial basics like budgeting, debt management, saving, and investing. The more you know, the better informed your financial decisions will be. Reflect regularly on your financial decisions and identify areas where you can improve. Practice self-control and avoid making impulsive purchases. Create an emergency fund to cover unexpected costs, avoid future financial crises, and ensure you don’t find yourself back in debt. Last but not least: we’ve already mentioned it twice, but the third time’s the charm – talk about your issues and seek professional help. Debt advisers, financial advisers, and even life coaches or therapists are all experts who can help you overcome your problems. And let’s also touch on the importance of social support; sometimes it can really help talking to your friends and family or joining a self-help group. Emotional support can do its part to make it easier to grapple with your debt.

Debt relief in Switzerland is no walk in the park, but you can eventually get yourself out of the chaos. The most important steps are early intervention, consulting a debt advisor, creating a realistic debt management plan, and learning from your financial mistakes. With the right help and a clear plan, it’s possible to gain back control over your financial situation and start anew. Stay positive and keep going. With the right plan you can overcome debt successfully and build a solid foundation for a better financial future. Do you want to dive deeper into the topic? Read our other articles in this series on avoiding debt and the debt landscape in Switzerland.