Debt Jenna Mäkelä has debts of 250,000 euros in seizure, which she will never be able to pay – Over-indebtedness causes bad incentive traps

If would just stare at the account balance, Pori Jenna Mäkelän not really worth going to work. The foreclosure mutilates such a large portion of his monthly income.

“If I gave up now, so to speak, we have a system where I could get it [kolmen lapseni takia] about the same amount of money as doing an insane amount of work every month, ”says Mäkelä.

Every morning Mäkelä tries to motivate himself. It is not easy, as he has debts of EUR 250 000 in foreclosure.

“Whatever I do, I will never get the same monthly salary in Finland that I would be able to pay off my foreclosure debt,” says Mäkelä.

“My debt is so high that the monthly amount going from my salary is the same as tearing those notes. It will not change the debt balance at all. ”

Sometimes, the foreclosure amount may actually have even increased if unpaid interest has been added to it.

Mäkelä is one of the ones the Finnish government wants published in February new employment measures. The government said it would begin preparations to change the bailout.

According to the proposal, those with foreclosure can receive one more month off in the future with certain income. For some, this would mean one automatic month off per year, while for others it would increase the number of months off to three. Seizure of income is suspended for the free months.

In addition, the government said it would begin work to reform the foreclosure system.

Mäkelä is of the opinion that one month off does not increase the incentive to work and does not show understanding of the situation, at least for those in long-term foreclosure.

Mäkelä does not only speak for himself, as he has helped people with debt problems both at work and as a volunteer. In the reform of the confiscation system, he believes that the views of people in execution should also be heard.

“Many say they could pull even without the free months if they come up with some way in which their own actions would be able to contribute to the obsolescence of debt. The obsolescence of debts could even be brought forward by continuous employment. ”

Investigator Ohto Kanninen was a year ago in a team of researchers who investigated the link between the bailout system and livelihoods and employment. Report the client was the Prime Minister’s Office.

Based on the study, the group also presented options for reforming the enforcement system. The addition of free months did not end up in the list of recommended measures.

According to Kanninen, the months of leave give the debtor a little more degree of freedom. For example, income can be concentrated in the free months. For the very poor, one month off can also increase well-being when stress levels drop even momentarily.

“Otherwise, it’s a complication of an already overly complex system.”

Managing Director of the Guarantee Foundation Juha A. Pantzar sees that increasing the free months of foreclosure “is a maintenance treatment and by no means an improvement”.

“Because the primary purpose of foreclosure is to get the debt paid off, or at least written off, in practice, the months of leave only prolong the foreclosure,” Pantzar says.

Kanninen and Pantzar do not believe that increasing the number of months off will have a lasting effect on employment. However, both also agree that the current enforcement system is in dire need of reform.

“For society, the incentive traps caused by over-indebtedness can be worse than those caused by social security,” says Pantzar.

According to Kanninen, the employment rates of those in foreclosure are about half lower than in others in the corresponding age groups.

“Execution is, in a sense, an additional tax. Initially, you get a certain net salary, and then, depending on your income level, about a third is taken away. Of course, it can influence the decision whether to go to the dune at all. ”

However, Kanninen emphasizes that the difference in employment rates cannot be explained solely by the incentive effects of foreclosure.

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“It can’t be that it takes four doctors 1.5 years to understand a system.”

Out the impact on the profitability of work is not a small matter. During 2021, 560,288 debtors were subject to recovery measures, of which 510,769 were private individuals. The rest were companies and communities.

Last year, the number of foreclosure debtors fell slightly, by 1.4 percent, but the trend has long been slowly growing.

What should be done about the bailout system and the whole debt settlement tube then?

According to Pantzar, there is a certain feeling and sign of infinity, according to Pantzar. However, he does not see that shortening the execution times alone is a sufficient solution.

The maximum duration of the withdrawal is 15 years. After that the remaining debt is forgiven. However, the maximum duration is loan-specific. If (and often when) a person has more than one loan foreclosure, the foreclosure can practically continue for decades.

According to Pantzar, a shortening of the execution period of a few years would not bring much relief to the people than to the national economy.

Instead, Pantzar believes that access to debt should be improved. Currently, about 6,000 people get into some form of debt settlement each year.

“Even in ten years, that means only 60,000 people. And there are half a million people in the foreclosure. Yes, the ratio should be something else. ”

The greater part debt settlements are made in the courts. In their debt settlement, the creditor is first repaid for 3 to 5 years, after which the remaining debts are forgiven.

Kanninen also sees that the creditor should be forgiven in one way or another more easily than at present. “By affecting the total maximum duration of the foreclosure or by facilitating the debt settlement,” he explains.

Kanninen gives Germany, for example, where it is easier to get into a debt settlement.

According to Kanninen, there are strict conditions for applying for a debt settlement in Finland and the application process is so demanding that it is not possible to get far from it without the help of financial and debt counseling or a lawyer.

In addition to intricacies, Pantzar believes that there is far too much randomness in the system. Too much has been left to the discretion of individual officials, such as those in the courts.

Another burning need for development, according to the duo, is related to the ambiguity of the entire debt management system. The foreclosure system, the duration of defaults and debt settlement practices are a very complex whole.

When Kanninen and another group of researchers set out to get to know and investigate the bailout system, the result was a 1.5-year project involving representatives of the national authorities and ministries to unlock the secrets of the system.

“It can’t be that it takes four doctors 1.5 years to understand a system,” says Kanninen.

“It should be the case that one can get it for one A4, and the citizen who comes under its system understands all the essentials about A4.”

As the third development proposal, Kanninen points out that the degree of foreclosure should be changed to progressive. Foreclosure would be lower at the low-income end and slightly tighter at the high-income end. In Germany, for example, the amount of income affects the rate of foreclosure in this way.

Pantzar sees a fundamental mental difficulty behind the system’s problems.

“Execution is seen as a matter of fairness. The system treats people like a bailout or debt settlement would be more of a punishment. Although the fact that someone has lived beyond their means may have been due, for example, to a small income and the fact that a decent life can be achieved other than by debt. ”

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“As a society, it doesn’t make sense to afflict people any more.”

Jenna Mäkelä recognizes really well what Pantzar is talking about the punitive nature of foreclosure. He has felt it in his skins throughout his adult life.

“I last had credit records when I was 18, and I’m 37 at the moment.”

Life without credit information makes Mäkelä feel like a B-class citizen.

“It’s quite acceptable how I can be talked to even in some customer situation. There is a register that tells me about things that might cause me not to provide a service, for example. ”

Mäkelä has no idea, because the day will come when he can walk into an insurance company’s branch, for example, and get insurance for himself, just like anyone else.

According to Mäkelä, it is the heaviest in the debt spiral that it is not known because it will end.

About two years ago, Mäkelä embarked on a debt settlement process.

Part recovered from gambling addiction Mäkelä’s debts are criminal.

“For the most part, my debts have been incurred by borrowing and playing for my loved ones.”

Mäkelä has confessed to his crimes and received parole from them as well as from community service.

Before applying for a debt settlement, Mäkelä worked for years to be able to show that his life situation and financial management are in good shape. Because of his criminal background, he has also done a lot of volunteering, for example, to prove change.

In the end, Mäkelä set aside time for financial and debt counseling, where things began to be clarified.

“It took me a year after going to the district court to get a decision that had been dismissed.”

On the recommendation of the Financial and Debt Adviser, Mäkelä took his application to the Court of Appeal. A few days ago, Mäkelä was informed that his debt restructuring application had been rejected.

He feels he has received a message from society that ‘sorry, it’s not worth trying.’

What wrestled with debt problems for years, would Mäkelä change the system?

When talking about the problems of the execution system, Mäkelä uses the prisoner comparison. In addition to serving a sentence, the purpose of the prison is to prevent recidivism, which is why prisoners are being rehabilitated.

“He gets into the bailout system again when he has not been able to manage his money. Measures should also be taken during the execution to ensure that the person has good financial control at the end of the execution. “

For example, it is strange for him not to save on bailouts, even though it is an integral part of financial management.

“If the washing machine breaks down while you are out, you can apply for it as income support from Kela, but it is wrong if you have saved money on your security contributions yourself.”

Mäkelä hopes that the reformers of the enforcement system will have enough information about the effects of indebtedness on people so that they can defend the relief.

“As a society, it doesn’t make sense to miserable people any more.”

Although debts weigh, Mäkelä feels that his life is good and that there are many things to be thankful for. Not everyone over-indebted is equally lucky.

“People and their situations are different. It can be really hard to find motivation to go to work in the mornings, ”says Mäkelä.

“Maybe my own motivation comes from doing a lot of things that I feel really matter in this society. I can’t do anything about debt, but maybe I can do something to make the path of others less rocky. ”