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Party Time in the Netherlands?

posted by Jason Kilborn

A comment from the Netherlands reminded me to post about an intriguing statistic I've been exploring. While consumer insolvency filing rates have been up around the world this past year (at least in the last quarter of 2008, as mentioned here and here), the Netherlands represents a serious anomaly. Total admitted consumer cases there plummted 38% in 2008, including a 42% drop in Q4 2008 as compared to Q4 2007, and a 1% decline from Q3 to Q4 of 2008. This is seriously surprising and somewhat troubling.

On the one hand, it might be that Dutch debtors are just way better off than their neighbors, and consumer financial distress is low in that corner of Europe . . . but I doubt this very much. The Raad voor Rechtsbijstand, which follows developments on the Dutch consumer insolvency law (known by its acronym, WSNP) has also expressed confused anxiety about the source of this drop in admissions (see here and here, in Dutch, noting among other things a 67% drop in admitted cases in Haarlem and a 54% drop in Rotterdam in the first half of 2008). The Raad speculated that perhaps improvements in the out-of-court workout process had led to less need for formal, coercive relief, but my own quick review of the results of that system and remarks from a friend in the Netherlands suggest that a slight uptick in consensual out-of-court arrangements does't begin to explain a 38% drop in admitted formal cases.

Alternatively, it could be that a reform implemented on 1 January 2008 drove down the admission rate, though I doubt this tells the whole story, either. The reform generally made the system simpler and more predictable, which should have made it more attractive to filers. While it made small changes in the admissions criteria (article 288 of the WSNP), I can't imagine that any of these seemingly minor changes would explain the drop. My Dutch colleague suggested that courts might be much more restrictive now in admitting cases for debtors whose problems are viewed as predominantly "social" rather than "financial" (e.g., drug addiction, compulsive disorders, inability to control spending [sic!]), so these needy cases may not be making their way into the system after 1/1/2008. I don't see anything in the paper record to support this view, but I'm still looking, as this disturbing approach to consumer relief would signal a very significant shift in perspective. As anyone who has dealt with consumer cases knows, MOST consumer insolvency clients have some substantial problem that might be categorized as "social" rather than "financial," and there's a strong causal connection between the two . . . but that certainly doesn't mean that these folks don't need (or wouldn't benefit greatly from) debt relief.

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