Thamara Belinatti and Heloisa Nogueira
The Over-indebtedness Law (Law 14.181/21) has opened up a new possibility for thousands of Brazilians facing financial hardship due to accumulated debt. When utilized correctly, this legislation can serve as an essential tool for restoring financial balance to individuals who find themselves overwhelmed by financial obligations they can no longer sustain.
The problem arises when, in order to cover unexpected expenses or maintain their standard of living, many people turn to various forms of credit—such as personal loans, financing, and credit cards—that carry significantly higher interest rates.
This practice leads to a dangerous cycle of indebtedness: consumers see their monthly income almost entirely consumed by loan installments, often leaving little to nothing for their own and their family's basic needs.
The over-indebtedness law was created precisely to offer a solution to these situations. Its main objective is to ensure that consumers can honor their debts without compromising their livelihood, guaranteeing a minimum percentage of income for a dignified standard of living.
Key benefits of the law include: the joint and fair renegotiation of debts, allowing over-indebted debtors to approach creditors to renegotiate—whether through out-of-court or judicial hearings (Art. 104-A)—where all parties are convened to seek a solution that is viable for the debtor and fair to the creditors; protection against misleading advertising, providing greater safeguards against abusive credit practices, such as advertising that induces consumers to take out loans without a proper assessment of their repayment capacity (Art. 54-D); and the prohibition of excessive deductions, reinforcing the need to ensure that deductions for loans and financing do not exceed the limit required for consumers to cover their basic expenses.
With the over-indebtedness law, consumers can seek a solution to this stifling situation. The law provides mechanisms for debtors to reorganize their financial lives and seek an agreement that takes into account their debts and repayment capacity, while always ensuring respect for the "existential minimum"—the amount necessary for the debtor and their family to live with dignity.
This existential minimum is one of the most important aspects of the new legislation. It ensures that, when renegotiating debts, the debtor retains a protected portion of their income to cover essential expenses such as food, housing, and healthcare.
It is always worth remembering the importance of seeking specialized legal guidance. A lawyer can help you understand your rights and navigate the over-indebtedness law. Furthermore, seeking professional help enables fair debt renegotiation, preventing abusive practices by financial institutions.
The over-indebtedness law represents a significant milestone in consumer protection in Brazil. Renegotiating debts based on the safeguards provided by this new legislation can be the first step toward regaining financial control and the peace of mind that comes with living free from the crushing burden of unpayable debts.
