Personal insolvency: process and requirements

In short: Personal insolvency (consumer insolvency) allows over-indebted private individuals in Germany a fresh start without old debts after a regulated procedure. Since a change in the law, the procedure usually takes three years.

In more detail: Before the actual insolvency comes an out-of-court settlement attempt with creditors.

In detail

• Out-of-court settlement attempt: Debt counselling services support negotiations with creditors.
• Court proceedings: If the settlement fails, the actual insolvency proceedings before the court follow.
• Good conduct phase: During the three-year phase, the garnishable part of income must be paid to a trustee.
• Discharge of residual debt: After successful completion, remaining debts are discharged.
• Protected account: Protects a basic amount of income during the procedure (pfaendungsfreigrenze-und-lohnpfaendung).
• Consequences: An insolvency entry with credit agencies affects creditworthiness for several years.
• Advice: Qualified debt counselling is required for many steps of the procedure or at least very helpful.