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Debt advice in Iceland is provided by Debtors‘ Ombudsman.

The agency serves the whole of Iceland and all services provided are free of charge. The Debtors’ Ombudsman represents the interests of debtors and offers free assistance to individuals who have serious difficulties meeting their financial obligations. The agency is an independent government institution and falls under the jurisdiction of the Ministry of Social Affairs and Labour.

The debtors’ ombudsman has a main goal of providing assistance for individuals facing serious payment difficulties with the aim of obtaining a comprehensive overview of their finances and to seek solutions.

The agency has three main tools to reach that goal.

  1. Financial consultancy

    This can entail acting as intermediary, guided by debtors’ interests, in communicating and negotiating with creditors. Advisory services can be useful for those who have lost control of their financial situation and want to gain a better overview of it. The agency aims to help individuals who are struggling to make their payments and do not know how to respond to their difficulties.

    Advisory services can also be useful for individuals who foresee that their financial position will deteriorate and want to act before the situation becomes unmanageable.

  2. Debt mitigation

    For debtors in long term difficulties the Law on Debt mitigation was adopted by parliament in 2010.

    The goal of debt mitigation is to enable individuals who are having serious difficulties paying their debts to restructure their finances and balance their debts and their debt service capacity, so that it will be realistic to expect that the applicant will be able to service their debt for the foreseeable future.

    Debt mitigation can be appropriate for individuals who can demonstrate that they will be unable to honor their financial commitments for the foreseeable future.

    The applicant must satisfy certain requirements that are laid down in the Act on Debt Mitigation for Individuals. When the Debtors’ Ombudsman has approved an application for debt mitigation, a supervisor is appointed to oversee the case. The superviso is a lawyer employed by the Office.

    The measure entails voluntary agreements made between individuals and their creditors with the assistance of the Office of the Debtors’ Ombudsman.

    Composition agreement

    If creditors lodge protests against the draft agreement, the supervisor will examine the protests. The supervisor determines whether information has emerged that could result in the cancellation of the debt mitigation negotiations. If voluntary negotiations prove unsuccessful, the debtor may declare their willingness to seek a composition agreement for contractual claims. The supervisor then takes a reasoned position on whether to recommend composition.

  3. Financial aid for bankruptcy proceedings

    The act on financial aid for bankruptcy proceedings was passed in 2014.

    The process aims to enable individuals in severe financial distress who have tried unsuccessfully to resolve their difficulties to request bankruptcy proceedings.

    • Assistance with bankruptcy expenses can be appropriate for individuals who are in severe financial distress and have tried unsuccessfully to resolve their difficulties, and who plan to request bankruptcy proceedings.
    • The applicant must satisfy certain requirements listed in legislation on financial assistance with the cost of security due to bankruptcy proceedings.
    • It must be clear that the individual does not have the finances to pay collateral security for expenses related to bankruptcy proceedings.
    • Our advisors can help determine whether this measure is appropriate.

Standard budget criteria

The agency has the role of publishing cost-of-living references that are used when assessing an applicant’s ability to make payments.