Families in debt lose sight of what they owe. A special bank would at least make that problem go away, writes Annemarie van Gaal, in her third article about getting your finances back on track.

In my last two columns I wrote about families in debt who, according to family finance institute Nibud, are costing society some €11bn a year. I’ve met some of these families. They are so behind with their payments they are completely overwhelmed. They don’t know which bill should be paid first, or what action to take. Meanwhile the fines from the central debt recovery unit CJIB are mounting up, the mail-order firms are adding 15% interest to the outstanding amounts, and letters announcing yet more debt recovery fees are falling on the mat on a weekly basis. Things go from bad to worse.

Our solution is to offer debt relief to such families. We know this is not a viable solution. Surrounded by sympathetic social workers, the families submit to a three-year financial regime which only confirms their victim status. Some 172,000 families are currently on debt relief and the number is growing. A sustainable solution is necessary. We need to make people take responsibility for their debts. Only then will they change their behaviour.

Suppose the government abolishes debt relief and starts a National Debtors Bank. This bank adds up all the outstanding debts a family has and pays them. The amount is lent to the family at a low interest rate by the government. This means the family only has to contend with one fixed amount of money to be paid back each month. The families will be registered with the bank and as long as they are paying off their debt companies are not allowed to lend them money or sell them goods on credit. If they do, they will be hit with an enormous fine. It is imperative these families don’t take on new debt otherwise the problem simply continues.

The advantage of such a bank is it makes people take on responsibility for their debt. They can keep track of it because the multitude of debts and fines is brought back to a single amount. This will simplify their finances and make them easier to handle. A National Debtors Bank would save the nation €11bn in debt recovery costs, evictions and write-offs. Why not give it a go? It’s better than simply writing off the debt. It seems worth a try to me.

Annemarie van Gaal is an entrepreneur and investor.

This column appeared earlier in the Financieele Dagblad