From Iceland — Government Takes Radical Steps to Relieve Household Debt

Government Takes Radical Steps to Relieve Household Debt

Published October 20, 2010

Government bills submitted to the floor of parliament today could bring major relief to households deep in debt in the wake of Iceland’s economic crash two years ago.
Public opinion of parliament has been at an all-time low lately, with a recent Gallup poll showing just 9% trusting the legislators therein. A major source of the distrust is general frustration with what is perceived as a lack of action from the government to help Icelandic families deal with household debt.
Today, a series of bills submitted to parliament intend to relieve household debt in four ways:
1. Homes facing foreclosure and then auctioning off will be protected from foreclosure until the end of March 2011.
2. Individuals in debt can receive shelter from collection agencies so long as they show that they are seeking assistance from the Debtors’ Ombudsman, who represents the interests of debtors and offers them support if applicable.
3. Homes that have sunken into debt and already been bought up by the Housing Financing Fund will be made available for rent to those who previously owned the homes, without having to make a down payment.
4. Those who have ended up bankrupt will have their debts expire two years from the time bankruptcy is declared.
The last point is an especially important one to many Icelandic people. The existing law would erase the debts of bankrupted people after four years. Many argued that this law did not go far enough. Minister of Finance Steingrímur J. Sigfússon said that this bill would prevent people “from being followed by their debts to the grave”.
A vote on all of these bills is expected this week.

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