What is over-indebtedness?

Over-indebtedness occurs when an individual or legal entity accumulates an amount of debt that exceeds what they are able to repay. This does not simply mean having multiple debts, but it is a situation where the financial burden of these debts becomes unsustainable and it becomes challenging or impossible to meet the financial obligations.

Consequences for over-indebtedness range from multiple debt-collection procedures (Betreibung) to bankruptcy. There may also be consequences for the future, where ones financial reliability is questioned, even after the period of over-indebtedness has ended.

Swiss credit laws try to protect individuals against such situations with the “Bundesgesetz über den Konsumkredit (KKG)”, (English: Federal Law on Consumer Credit).

This law prohibits leasing companies from granting leases to people that have running debt collections or would be in danger of slipping into over-indebtedness due to the newly added lease.