Consumer insolvency – debt-free in 3 years?

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the insolvency code offers over-indebted consumers the opportunity to file for bankruptcy within regular 3 years (plus the out-of-court preparation period) to be freed from their debt, even if no attachable income or assets can be obtained during the entire duration of the proceedings. Due to the regulation of deferral of costs even those who are completely destitute can participate in the procedure and achieve debt relief.

How do consumer insolvency proceedings work??

Affected parties can apply to the competent insolvency court for a opening of consumer insolvency proceedings combined with an application for the granting of "residual debt discharge". First, however, they must try to reach an out-of-court agreement with creditors on debt repayment. A suitable insolvency advice center or person, usually a lawyer, must be involved in this settlement attempt.

At the very least, personal counseling with in-depth examination of the income and asset situation have taken place. If such a settlement cannot be reached, the debt is formally established in insolvency proceedings. Any assets that can still be seized are realized and the debtor is discharged proceeds distributed to creditors. This is followed by the so-called "good conduct phase" which, together with the insolvency proceedings, regularly lasts 3 years.

During this period, the debtor must assign the attachable income to a trustee. The debtor distributes the collected amounts to his creditors. If these amounts are not sufficient to pay off the entire debt, the remaining debt will be forgiven at the end of the proceedings. If the debtor is so destitute that, despite his efforts, no assets or attachable income are distributed during the term of the proceedings, he is released from the obligation to pay for all his debts.

The procedure proceeds in the following steps:

  • 1. Out-of-court settlement attempt
    (a prerequisite for filing a petition)
  • 2. application to the insolvency court
    (incl. Certificate from a suitable office or person about the failure of the out-of-court settlement attempt)
  • 3. Possibly. Debt settlement procedure
    (further attempt to reach an agreement with the creditors with the support of the court, if the court considers a renewed attempt to be expedient)
  • 4. Insolvency proceedings
    (determination of the asset and debt situation, if necessary. Realization of existing attachable assets)
  • 5. Possibly. insolvency plan proceedings
    (reorganization procedure in insolvency proceedings with the participation of the court, creditors and the insolvency administrator)
  • 6. Good conduct phase
    (assignment of attachable income to insolvency administrator, obligation to perform reasonable work, notification of significant changes to court and insolvency administrator)
    duration: regular 3 years, starting from the opening of the insolvency proceedings

How long does the consumer insolvency procedure last??

Consumer insolvency usually lasts 3 years. This applies to all procedures that have been started since 01.10.2020 have been filed.

For proceedings initiated between 17.12.2019 and the 30.09.2020 have been applied for, the following transitional regulation is valid:

  • Application from 17.12.2019: 5 years 7 months
  • Application from 17.01.2020: 5 years 6 months
  • application from 17.02.2020 : 5 years 5 months
  • Application from 17.03.2020: 5 years 4 months
  • Application as of 17.04.2020: 5 years 3 months
  • Request from 17.05.2020: 5 years 2 months
  • Application from 17.06.2020: 5 years 1 months
  • Application from 17.07.2020: 5 years 0 months
  • Application from 17.08.2020: 4 years 11 months
  • Request from 17.09. Until 30.09.2020: 4 years 10 months

For proceedings already commenced before 17.12.2019 application, a residual debt discharge period from a total of 6 years. Under certain conditions, this period can be extended to 5 or more years. 3 years can be shortened.

Does the duration of the procedure change if i want to go through a second procedure?

Yes, the duration of a 2. The procedure is extended if the discharge of residual debt has already been obtained once. For secondary proceedings, a period of 5 years applies, if the debtor is awarded a debt on the basis of a judgment issued after 30 years of age. If you have already been granted discharge of residual debt once before the application was filed on September 17, 2020.

Can I also go through insolvency proceedings as a recipient of unemployment benefit I or II??

Basically yes. Although you are obliged to actively seek work during the duration of the procedure and to accept any reasonable work. However, if you do not find any, you can still be released from your debts, even if the creditors have not received any payments at all. It is important, however, that you can prove your efforts – such as regular applications.

What happens if i become unemployed during the process?

no problem, you can still be freed from your debts. However, you must actively seek a new job and be able to prove it. However, it must also be reasonable to expect you to take up a job, which means that you have to be able to pay the costs. B. In the case of bringing up small children, this may not be the case.

Do I have to work again as a pensioner in order to be freed from my debts? What if I receive social assistance or. I am incapacitated?

If you have reached the statutory retirement age or are incapacitated for health or other reasons, you will no longer be required to work during the proceedings. Obligation to make efforts to find a job. A debt relief is still possible. However, the situation is usually different if you have taken early retirement before reaching the statutory age limit.

What are the costs and who pays them?

The procedure is subject to a fee. There are the following costs:

  • court costs
  • costs of the insolvency administrator / trustee
  • If applicable. attorney fees (only if you hire your own attorney).

In principle, the costs are paid out of the "mass" paid, i.e. from what can be seized from you. However, this will often not be much.

If your own funds are not sufficient to cover the costs of the proceedings, you can apply for a deferral of the costs for each stage of the proceedings.

The court grants the deferment if there are no reasons that exclude the discharge of residual debt.

If seizable amounts flow to the insolvency administrator/trustee during the proceedings, the costs will be compensated first. If the costs are not covered at the end of the procedure, you must contribute to the repayment of the costs for a maximum of 4 additional years, provided that you are financially able to do so. This is only the case if you have higher income after the end of the procedure. the deferment may be subsequently revoked if your circumstances change, you have made false statements or you have not fulfilled your obligations.

Can I transfer my assets (e.g. B. car, owner-occupied apartment) and still be discharged from debt?

Basically no. your existing assets will be liquidated, residential property will be auctioned off. Otherwise, the attachment regulations of the German Code of Civil Procedure apply. What is necessary for living may not be taken away from you. You will only be allowed to keep a car if you or a family member absolutely need it to get to work, resp. If you are severely disabled or seriously ill and are therefore dependent on it. The same applies if you need the vehicle for a severely disabled or seriously ill family member. If it is a relatively valuable car, the insolvency administrator can make an exchange despite seizure protection and provide you with a less valuable model.

What happens to my rented or cooperative apartment??

Rental or cooperative apartments are not affected by insolvency. You must continue to pay the monthly housing costs yourself during the proceedings. The security deposit with the landlord will not be liquidated as long as you live in the apartment. If you are in default during the opened If you move during insolvency proceedings and then receive the deposit back from your landlord, it will only become part of the insolvency estate and be used by the insolvency administrator if the landlord had not previously released the apartment. As a rule, he will already do so at the beginning of the proceedings. So normally you have nothing to worry about and you can use the returned security deposit z.B. Use for your new apartment. Only if the declaration of release of the insolvency administrator was not granted for once, the latter would be able to use the deposit. In this case it would not help you that you need the deposit for the next deposit payment to the future landlord. During the good behavior period however, you do not have to hand over the deposit to the estate in any case. Cooperative shares are mostly protected. Here too, however, you must be prepared for the fact that the cooperative shares that become available may be liquidated in the event of a change of residence.

What I have left to live on during the proceedings?

No one can take away your subsistence level. If you have an income, what you have left is determined by the garnishment table in accordance with § 850c of the German Code of Civil Procedure. Here is what you must have left to live on, graded according to income and maintenance obligation. Under certain circumstances, however, the amount remaining to you may be increased. This may be the case, for example, if you have to pay particularly high rents or incur high costs for traveling to work.

Will I be released from all debts?

The discharge of residual debt applies in principle to all debts that you have at the time of the opening of the proceedings.

Exception: debts from intentional crimes and the like. So if you z. B. If you have committed fraud, bodily injury or damage to property, you must continue to pay for the damage caused by this. You may also have to continue paying off tax debts and maintenance debts even after the end of the proceedings and the granting of residual debt discharge if you have committed tax evasion or breached your duty to pay maintenance.

Are there any special obligations that I must observe during the procedure??

Yes, you have particular duties to inform and cooperate. The most important ones are:

  • Disclosure of asset and income situation.
  • Duty to inform about change of residence and workplace.
  • obligation to look for reasonable work.
  • Surrender of half of the inheritance.
  • Disgorgement of winnings from sweepstakes, lotteries, etc. However, there is a de minimis limit for gains of minor value.
  • Half of gifts given out, unless such gifts are usual and customary.

Can my insolvency proceedings fail?

Yes, a consumer insolvency fails primarily if the proceedings are inadmissible or the discharge of residual debt is denied by the court. This occurs mainly when they have not fulfilled their specific obligations during the process. In addition, there may be other reasons why the process may fail. The most important ones are:

  • Conviction for an insolvency offense.
  • Misrepresentation for the purpose of obtaining credit or public benefits (e.g., fraud).B. social benefits).
  • Waste of assets.
  • concealment of assets, setting aside of assets.
  • Recent conclusion of insolvency proceedings.
  • Justification of unreasonable liabilities.

Can I be discharged from my debts without court proceedings??

Under certain circumstances yes. The law obliges the debtor to first try to reach an out-of-court settlement with his creditors.

If this settlement attempt is based on what the creditors are likely to get in the court proceedings, they may also agree to a corresponding voluntary agreement. For the creditors, too, conducting the proceedings is time-consuming and costly.

Is there a minimum amount that I must pay to the creditors in any case??

No, the legislator deliberately did not introduce a minimum quota in order to give debtors with no income the chance of a fresh start.

What can I do now?

You can start preparing immediately. This includes, above all, arranging and completing all documents relating to its creditors and the claims they have asserted. It is also important that they obtain as honest an overview as possible of their income and expenses and compare them with each other. Making an appointment with a recognized non-profit debt counseling agency should be done as early as possible, as unfortunately they often have waiting periods.

This content was prepared by the community editorial team in cooperation with verbraucherzentrale nordrhein-westfalen for the network of consumer advice centers in germany.

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