§ 7-3. What happens to secured money when a debt settlement does not come about

Gjeldsordningsloven·LOV-1992-07-17-99

Machine-translated from Norwegian. The Norwegian text is the one that applies. Read the original in Norwegian.Norsk English العربية Polski Українська

Brief summary

Without a debt settlement (gjeldsordning), the enforcement officer (namsfogden) divides the secured funds proportionally between the creditors (kreditorene).
Creditors who would have been paid through deductions are paid first.
The rest can be distributed differently if the result would otherwise be unreasonable for the debtor (skyldneren).
The protective measures under § 3-3 lapse.

The text of the law (unofficial translation)

§ 7-3. Distribution of funds secured under § 3-3 when a debt settlement does not come about

If a debt settlement does not come about, the enforcement officer distributes the funds that have been secured under § 3-3 second paragraph proportionally among the creditors (fordringshaverne), but so that creditors who would have obtained payment through deductions are paid first, as if the opening of debt negotiation (gjeldsforhandling) had not taken place. After these creditors have received what they are entitled to, surplus funds may be distributed in another way if a proportional distribution would have unreasonable consequences for the debtor. In the assessment, weight shall be given to whether the debtor has due and unpaid debt secured by security (pant) in their own home (bolig).

Furthermore, securing under § 3-3 first paragraph ceases to apply. The enforcement officer ensures that the protective measures are lifted.

Source: Lovdata — Gjeldsordningsloven (the Debt Settlement Act) § 7-3

What does this mean?

The starting point is that the enforcement officer divides the secured funds between the creditors in proportion to the size of their claims (proportionally).

There is an important difference for creditors who would have been paid through deductions, for example from wages. They are to be paid first, as if the negotiation had never been opened. Only after that can the rest be distributed.

The rest can be distributed in a way other than proportionally if the usual division would hit the debtor unreasonably hard. It shall count that the debtor may have defaulted on loans secured on their home. The law says nothing more about how this is to be weighed, so the assessment is discretionary.

The link with § 3-3 is central. That section allows the enforcement officer to secure the debtor's assets and decide on a protective wage deduction (sikringstrekk) from wages and other payments while the negotiation is ongoing. The securing has the same effect as an attachment (utlegg) in relation to the debtor and third parties. The deduction is carried out as a wage deduction order (utleggstrekk), and claims with better priority are covered first. When the settlement does not come about, § 7-3 is what clears up after this securing.

The securing also ceases to apply, and the enforcement officer ensures that the measures are lifted.

The section is one of several rules in chapter 7 on what happens around and after a settlement. § 7-2 concerns security that lapses when the settlement has been completed, and § 7-1 concerns the registration that is deleted when the negotiation period expires without a settlement.

Example: The enforcement officer has secured deductions from the debtor's wages. The negotiation ends without a settlement. A creditor who would have obtained payment through ordinary deductions then receives their share first. The rest is divided according to the size of the claims, unless that would be unreasonable for the debtor.

Related sections

All sections of the Debt Settlement Act →