Beyond debt: understanding and overcoming over-indebtedness as a social phenomenon

Over-indebtedness: a social phenomenon even before an economic one

Over-indebtedness, officially defined in the Italian Business Crisis and Insolvency Code (Codice della Crisi d’Impresa e dell’Insolvenza – CCII, art. 2, para. 1, letter c), is the situation in which a person can no longer meet the debts they have taken on, either with their income or with their assets. It is not simply a temporary difficulty in balancing the monthly budget, but a structural condition in which the accumulated debt permanently exceeds the income and resources available.

This is explained by Federica Gorgerino of Fondazione Welfare Ambrosiano (FWA), a non-profit organisation set up in 2009 by the Municipality of Milano, the Metropolitan City of Milano, the Chamber of Commerce and the trade unions CGIL, CISL and UIL. Its mission is to offer temporary, non-welfare-based support to those who find themselves in the “grey areas” of the social protection system.

The main tools that FWA offers free of charge include:

• solidarity credit and solidarity credit for housing;
• mentoring and business microcredit to start or support self-employment and micro-enterprises;
• services for people in financial hardship or over-indebtedness, to assess their actual situation and identify ways out.

Debt is also a social phenomenon

In 2024, together with ACLI Milanesi, Movimento Consumatori Milano, Camera Arbitrale di Milano, Fondazione Lombarda Antiusura and Fondazione San Bernardino, FWA set up RAS – Rete Ambrosiana Sovraindebitamento (Milan Over-indebtedness Network), to offer guidance and targeted advice on debt in Lombardia.

As Federica Gorgerino points out, the network’s work is based on a fundamental premise: over-indebtedness is not only an economic and financial phenomenon or an accounting problem, but a genuine social phenomenon.

A financial crisis brings with it layers of cognitive, relational and identity fractures that affect every aspect of people’s lives.

People feel overwhelmed and powerless, and stop trying: contracts, official documents and numbers become an enemy because they feel they have lost control over their lives. Weighed down by shame, guilt and fear of judgement, they tend to hide the problem and withdraw from their social and family circles.

Debt also creates a deep identity crisis: it absorbs a person’s entire sense of self, and their personal story ends up coinciding solely with their condition as a debtor.

Giving people back their agency

The primary goal of FWA and of the network behind RAS is to give agency back to the people they support.

The path out of debt is an empowering form of accompaniment, not a procedure to be delegated to a service. It requires the active and direct participation of the beneficiary, who is called on to take back ownership of their life plan.

We start from the person, not from the debt.

Working on agency means ensuring sustainability and resilience not only for the individual, but for the entire social and economic fabric.

In practice, support works on several closely intertwined levels:

• translating and explaining every step of the procedure, because those who understand take part, and those who take part regain ownership of their path;
• financial education that is not a separate course but grows together with the support, for example through jointly building the household budget;
• rebuilding a personal life plan that makes it possible to get out of debt with new tools and with the ability to make independent financial decisions in the future.

The vulnerable people supported by FWA – who are the majority – would hardly be able to deal with the debt settlement process on their own. The procedures are long, complex and emotionally draining, and without constant support the risk of dropping out is very high.

For this reason, the network’s support is not an optional extra, but often the very condition that makes real change possible.

RAS Lab: training local “antennas”

Over-indebtedness, a topic still little known in public debate, is inevitably intertwined with many aspects of social work.

That is why RAS Lab was launched in 2026, a training programme for workers and volunteers in the Third Sector and public services.

The aim is to train genuine local “antennas”, able to pick up signs of hardship and create connections between organisations with different but complementary skills.

According to the powerful metaphor of the blind men and the elephant of Caliph Omar, proposed during the training, social workers often grasp only a few fragments of over-indebtedness without understanding its complexity.

The training aims instead to restore the “vision of the elephant” as a whole, helping to piece together the different parts perceived – the trunk, the legs, the tail – through a listening-based approach.

Image: Blind monks examining an elephant, ukiyo-e print by Hanabusa Itchō (1652–1724).

A second chance exists

The RAS experience is certainly a positive one, but it is important to know that, despite possible local and regional differences, clearing one’s debt and having a second chance is a right recognised for all those who cannot be declared bankrupt, as established by Law no. 3 of 27 January 2012.

The recent EU Directive 2023/2225 also requires Member States to promote and guarantee professional and independent debt advisory services by 2026.

An integrated approach to over-indebtedness is being consolidated through the joint action of institutions. Examples include:

• the Lombardia Regional Law on preventing and tackling over-indebtedness, which formally recognises the phenomenon as a social priority even before an economic and legal one;
• municipal or metropolitan Over-indebtedness Help Desks, such as the one in the Metropolitan Area of Torino, which act as free access points for guidance to citizens.

Being able to get information and receive a transparent, free initial assessment is a right.

Knowing this is essential to avoid turning to private paid providers who offer “self-interested” advice and promise easy solutions. There are no easy solutions: there are paths.

Throughout Italy, people can turn to the OCC (Organismi di Composizione della Crisi – Crisis Settlement Bodies), set up at Professional Associations, Chambers of Commerce or Municipalities, which are the first point of reference for free guidance and access to court procedures.

The general advice is to always rely on institutional and transparent channels, such as Anti-usury Foundations listed in the ministerial registers and consumer associations.

The role of the Third Sector

The RAS Lab experience reminds us that Third Sector workers, when dealing with these issues, can rely on some fundamental tools of their profession: the trust built with people, awareness of their own role – not to solve the problem, but to identify it and open up a space of possibility – together with time, listening and patience.

All it takes is picking up a signal and opening the right door, one step at a time. The network does the rest.

The image used is Blind monks examining an elephant, an ukiyo-e print by Hanabusa Itchō (1652–1724).