§ 5-21. When the co-debtor's liability for the debt is reduced

This section explains how the liability of a co-debtor (those who are jointly liable for the loan) becomes smaller over time. The main rule is that payment to the bank reduces the liability, to the extent the bank could also have claimed the amount paid from the co-debtor. So it is not enough that someone pays. The payment must relate to something the co-debtor is liable for.

The liability is also reduced regardless of what has actually been paid. It is calculated as if the loan had been repaid as the agreement provided. If the bank has granted a payment deferral without the co-debtor's consent, and the deferral extends the liability, the liability is reduced when six months have passed from the original time of payment.

Notification determines how far the reduction goes. If the bank can prove that it has sent notice of default under § 5-18, the liability is not reduced. If the notice is sent more than three weeks after the default occurred, the liability is reduced for the amounts that fell due more than three months before the notice was sent. The bank therefore has a strong need to comply with the duty to notify in § 5-18, which among other things requires written notice in the event of default and that the co-debtor is kept informed.

The fourth subsection refers to § 6-8 on debt insurance. If debt insurance has been taken out for the liability and the insured event occurs, the liability is reduced as if the customer (kunde) had paid themselves. The section on personal guarantees (kausjon) also states that no right of recourse (regress) can be claimed for a payout from the debt insurance. This rule applies correspondingly here.

This section concludes the co-debtor rules, which begin with the scope in § 5-16. The rules on allocation of liability (§ 5-17), the right to information (§ 5-19) and release of security (§ 5-20) make up the rest of the package. Example: The bank does not send notice of default, and the other co-debtor therefore never learns that the loan is not being paid. His liability is then reduced because of the bank's failure.