According to the Ministry of Justice, around 100,000 debtors in Estonia owe money to approximately 20,000 individuals and businesses. The ministry has unveiled plans to reform debt enforcement rules, aiming to both simplify collections and improve protections for debtors.

The main proposed change would replace the current complex system for calculating protected income with a simpler percentage-based model. Under the proposal, 10 percent of income at or below the minimum wage could be garnished, 30 percent of income between one and two times the minimum wage and 50 percent of income above that level. Higher rates could apply in child-support cases.

For example, if a debtor earns less than the minimum wage of €946 per month, €94.60 would be withheld from their income. For income between one and two times the minimum wage, between €94.60 and €567.60 would be withheld. For income exceeding twice the minimum wage, the garnishable amount would be anything above €567.60 per month.

The ministry argues the new system would make enforcement clearer, reduce administrative costs and leave debtors with a better chance of retaining enough income to cover basic living expenses. It also hopes the changes would encourage people to remain in formal employment rather than conceal income or work in the shadow economy.

The ministry says the current system, which can result in relatively high withholding rates, has contributed to some indebted individuals leaving the labor market or working off the books. Creditors could also benefit, as repayments would become more stable and predictable over time.

"If a debtor remains in the formal labor market and does not disappear into the shadow economy, there is a greater likelihood that payments will continue regularly and that the claim will ultimately be satisfied," the ministry said in its policy proposal.

The reform would also reduce the workload of courts and bailiffs by limiting requests to reduce garnishments and disputes over enforcement actions.

Under the proposal, the protected non-garnishable amount would apply to only one of a debtor's bank accounts. Any additional accounts would be fully subject to garnishment. Employers would no longer have to manage garnishment orders or communicate with bailiffs, provided wages are paid into an account at an Estonian credit institution.

The ministry estimates there are between 400,000 and 500,000 enforcement cases involving around 90,000 debtors at any given time, meaning businesses could see significant savings in administrative costs. Exceptions would remain for income routed through third parties or foreign bank accounts, while benefits intended for third parties, such as child benefits, would continue to be exempt.

The ministry began preparing the reform in 2024 after consulting stakeholders. It expects legislation to reach parliament in the second half of next year, with the new system entering into force in 2028.

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