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Overindebtedness – Reports from Sweden quantify the cost to society of over-indebtedness and find that measures against it are not sufficient and that debt relief would be more effective if it was not granted so late.

Overindebtedness specialist and ECDN partner from Sweden Prof. Richard Ahlström shares two recent reports that he has worked on recently. The first one concerns the cost to society of over-indebtedness in Sweden. This report was published yesterday (16.6.2015) by the Swedish National Audit Office. In the first link below there is a summary in English. The Audit Office is calculating with a so-called “floor-level” based number of over-indebted people in Sweden only encompassing 28,000 individuals. (In reality it is at least 380,000 plus family members, according to two recent Governmental investigations). Anyway, the costs to society attributed to over-indebteness with a base of 28,000 individuals sums up to roughly 6 Billions Swedish crowns (about 700 millions Euro) per year. The calculation is based on Ahlström’s own report (in Swedish - See Link 3 below). The costs are based on data focused on loss of production, health-care costs, disability pensions, social security and unemployment support expenditures. According to Ahlström’s own calculation using the base of 400,000 people, the total costs sum up to more than 200 Billions Swedish Crowns per year.
In the second link, the full report (PDF) in Swedish by the Swedish National Audit Office is made available.
In addition, the fourth link, is to a recent small report that Ahlström’s and his co-researchers Sonya Edström and Mattias Savemark wrote for the Swedish Consumer Agency about the rehabilitative value of debt relief.


Extracts from the two reports in English:


Swedish NAO Audit Report 2015:

June 16 2015: Report says Measures against over-indebtedness not sufficient


The number of individuals who are so heavily indebted that they risk never being able to repay their debts is increasing and growing numbers are applying for debt restructuring. The Government should make better use of the possibilities that exist to get the debt restructuring system working effectively. 

The Swedish National Audit Office's recommendations 

Recommendations concerning the costs of over-indebtedness

  • The Government should take measures to raise the quality of statistics concerning the existence of over-indebtedness in society and the costs this entails in the form of reduced labour force participation and ill health, to enable improved design of preventive and rehabilitating measures.

 Recommendations concerning debt restructuring

  • The Government should ensure that debt restructuring operations at the Swedish Enforcement Authority have the capacity to manage the increasing inflow of cases without waiting times becoming too long. A long period of indebtedness is strongly linked to ill health. Retaining or increasing the capacity of the Swedish Enforcement Authority becomes particularly important in light of the Government’s plan to take measures aimed at more applications for debt restructuring. The costs that arise could probably be covered for example by reduced expenditure on healthcare due to reduced ill health among over-indebted individuals.
  • The Government should support the Swedish Enforcement Authority in its continued work of identifying prospective debtors for debt restructuring in order to inform them of the possibilities of debt restructuring.
  • The Swedish Enforcement Authority should continue to develop the work of identifying prospective debtors for debt restructuring in order to inform them of the possibilities of debt restructuring. Within this framework it is important to continue investigating the reasons for the increase in the number of prospective debtors for debt restructuring.  

Recommendations concerning conditions for budget and debt counselling services

  • The Government should clarify the regulatory framework that governs central government supervision of municipal budget and debt counselling, so as to ensure that the Health and Social Care Inspectorate is equipped to carry out supervision of the services in all municipalities, as well as to audit the quality of services.
  • The Government should draw up clear basic requirements and targets for municipal budget and debt counselling services. Partly to enable appropriate supervision, partly to strengthen the role of the services.
  • The Government should augment the Swedish Consumer Agency’s resources for support to municipal budget and debt counselling services in order to better match the municipal counsellors’ needs, for example as regards education and training.
  • The Government should initiate the building of a network between agencies and actors concerned, for the purpose of cooperating on issues related to over-indebted individuals and budget and debt counselling. The network should consist of actors that in various ways come into contact with, and refer to the municipal budget and debt counselling services

Apart from these recommendations, the Swedish NAO wishes to encourage the Government to investigate more closely alternative ways of funding budget and debt counselling services. One example that can be given is the situation in the United Kingdom. The British equivalent to the budget and debt counselling services is funded partly by a fee levied on British financial market actors. The fee is levied by the UK equivalent of Finansinspektionen, the Financial Conduct Authority.


Report 2014: Is debt relief rehabilitative? - An evaluation of debt relieved persons’ health, life quality and personal finances three years after conducted debt relief

The purpose of this report is to provide greater supporting material for a discussion on which rehabilitative impact debt relief has for the individuals. The issue is whether the opportunity to help is provided too late.


The purpose of this report is to provide greater supporting material for a discussion on which rehabilitative impact debt relief under Swedish law has for the individuals who undergo such a process. The issue is whether the opportunity to help the indebted to return to a “normal” functioning social life is provided too late. Another focus has been to investigate the significance of the municipalities' Budget and debt advisory service during this process. 
The study, which is of a pilot study nature, is probably of a unique kind as it is the first which measures rehabilitation effects of debt relief in Sweden. The authors are docent Richard Ahlström, head of department at Malmö University, Sonya Edström and Mattias Savemark, Mid Sweden University - Östersund and the conclusions and viewpoints presented in the report are those of the authors and they are responsible for the accuracy of the content. 
The Swedish Consumer Agency hopes that this report will provide supporting material and result in a discussion, primarily among decision makers within municipalities, county councils and the state on what legislation ought to contain in order to attain the goal of being rehabilitative for the heavily indebted, who get the opportunity to undergo this process. Other areas of discussion include the welfare costs which arise when citizens end up in unsustainable over-indebtedness and the need for help and support from a professional and competent Budget and debt advisory service. 
The Swedish Consumer Agency
Karlstad, November 2014


The purpose of this study is to evaluate the level of possible socio-economic, physical and mental rehabilitation among persons who have undergone debt relief in accordance with the rules of the Debt Relief Act. An evaluation of the finances, health and life quality has been conducted during and after the debt relief among individuals included in the investigation. There has also been a special focus on the significance of the municipal budget and debt advisory service for over-indebted persons during the debt relief process.
The study includes thirteen per cent of all persons who underwent debt relief during the period 2003-2008. Thus, it does not relate to a total group investigation, but rather a pilot study. More than half stated that they had been over-indebted for ten years or more before they applied for or were granted debt relief. Three years after the debt relief had ended, approximately 90 per cent answered that they were still debt-free, and that only in a few cases new debts had emerged during the debt relief period.
The long period of over-indebtedness, i.e. the period before debt relief, has entailed that ill-health had already developed. In previous studies the authors illustrated that massive ill-health manifests during the period of over-indebtedness. In addition, many persons who are already ill have a higher risk of over-indebtedness. It is therefore highly likely that the severe sickliness during the debt relief period which has been demonstrated in this study, has largely already established during the period of over-indebtedness or even before. This combined with the natural occurrence of an age gradient of ill-health, i.e. that health deteriorates year from year, particularly in the age interval of the research group, probably entails that possible rehabilitation effects of ill-health during and after the debt relief period cannot be clarified.
Many results in the study indicate that the standard of living three years after the conducted debt relief is unchanged compared to the period before, while the physical and mental health has even deteriorated. Over half state that the strained and long-term financial situation has affected their relationship negatively with their family. It has to be considered as highly alarming that over ninety per cent of the research participants completely or partially had to refrain from contact with their children during the debt relief period. It is also noteworthy that the majority of the research participants live in the same mental conditions and social structures as during the period before debt relief. The positive consequences of being debt-free appear not to have emerged to a large extent even in terms of the research participants' total financial activity vis-à-vis the surrounding community.
The majority of the research participants state that the support from the municipal budget and debt advisory has been very important for self-confidence and has created orderliness in the financial situation, which has resulted in that they have had the stamina to move on and have felt more at ease.  
A predominant majority also believed that the support was of high or very high significance for the success of the debt relief.
All in all it can be said that over half of the research participants have left working life, approximately one-fifth have become divorced and another 17 per cent have lost their partner or spouse. In general there is satisfaction in terms of the debt relief and joy over being debt-free and receiving qualified help and support from the municipal Budget and debt advisory service.
In other assessments related to health, finances, the social life and belief in the future, the research participants are overwhelmingly negative. It can therefore strongly be questioned whether the debt relief has been rehabilitative for the individuals who were included in the study and that one reason for this could be that debt relief was granted too late when the physical, mental and social situation had deteriorated too much due to the long term over-indebtedness.


ID: 48843
Author(s): SCR
Publication date: 19/06/15

Report Report 2014: Is debt relief rehabilitative? (EN)

Swedish Audit Report 2015: Government measures against overindebtedness (Summary EN)

Created: 19/06/15. Last changed: 26/06/15.
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