📉 Debt and personal insolvency
In brief
People who become unemployed often also fall into financial difficulties. Debt counselling is a municipal integration service to which you have access within the municipality’s exercise of discretion. In cases of hopelessly high indebtedness, personal insolvency proceedings followed by discharge of residual debt can be a way out – since the insolvency law reform of 2020 this is possible after just three instead of six years.
Step by step
- Visit a debt counselling centreContact a recognised debt and insolvency counselling centre – often the Jobcenter arranges or funds this as a municipal integration service.
- Consider an out-of-court settlement attemptBefore court insolvency proceedings, an out-of-court settlement attempt with the creditors is in principle required.
- Apply for personal insolvencyIf the out-of-court settlement fails, consumer insolvency proceedings can be applied for at the competent insolvency court.
- Go through the assignment periodDuring the assignment period, attachable income and assets must be handed over to a trustee; while receiving Grundsicherungsgeld, nothing is as a rule attachable anyway.
- Receive discharge of residual debtAfter the assignment period has ended, the remaining debts are discharged.
Deadlines
- A minimum quota of 35% of the claims has no longer been a requirement for regular discharge of residual debt after 3 years since the 2020 reform – anyone who additionally reaches this quota may under certain circumstances obtain further advantages, but does not have to in order to become debt-free at all.
- Not every debt counselling centre is free of charge or independent – have the Jobcenter or a Verbraucherzentrale (consumer advice centre) name a recognised, mostly municipally funded centre.
- This research found no reliable primary source on further details of the out-of-court settlement attempt under § 305 InsO – get specific advice on this from debt counselling rather than relying on blanket statements.
In depth · legal basis, figures and practice – for advisers and professionals
Debt counselling as a mandatory municipal service
Under § 16a SGB II, municipal integration services include, among others, debt counselling, psychosocial support, addiction counselling as well as care of minor or disabled children or home care of relatives, insofar as this is necessary for integration into work. The specific design is at the discretion of the municipality.
Consumer insolvency proceedings
If an out-of-court settlement with the creditors is not sufficient, consumer insolvency proceedings can be applied for at the competent local court (insolvency court). During the subsequent assignment period, attachable income is handed over to a trustee; since the standard need under Grundsicherungsgeld is regularly below the attachment exemption thresholds, usually nothing has to be handed over during benefit receipt.
Discharge of residual debt (§ 287 InsO)
Since the reform of consumer insolvency law (in force since 1.10.2020) the standard assignment period until discharge of residual debt is three years, regardless of whether a particular satisfaction quota is reached. If the debtor was already granted discharge of residual debt within the last eleven years before the current application, the period is extended to five years in a repeat case (§ 287a InsO).
A question about your situation that this page does not answer? Write to us or use the contact form – we will tell you which office is responsible and what to bring. Free of charge, without individual legal advice.