Are you in debt and see no possibility of repaying your debts in the next few years? Insolvency proceedings may be the way out.
We can only give you a rough guide to insolvency proceedings here. Insolvency proceedings are not a quick solution. There are sometimes good reasons not to file for insolvency. So you should really carefully consider whether insolvency proceedings make sense. It is essential that you obtain sound professional advice.
Note: Self-employed persons must apply for standard insolvency proceedings (RIV). The main difference between these proceedings and VIV is that stages 1 and 2 no longer apply. RIV pro- ceedings also apply to former self-employed persons if they have more than 19 individual debts or at least one claim relates to unpaid social security contributions or wages for employees.
How do VIV proceedings work?
The process can be imagined as a staircase:
- Stage 1: Attempt to reach an agreement with all creditors
- Stage 2: Draw up a debt settlement plan with the court (this stage can be omitted)
- Stage 3: Court insolvency proceedings
- Stage 4: „Good conduct phase“
When the fourth stage has been successfully completed, you will be discharged of your residu- al debts. You are then released from the debts that existed at the beginning of the insolvency proceedings.
Stage 1: Out-of-court settlement attempt
Prerequisite 1: You must declare all your debts. Frequently people do not know exactly what debts they have. You should tell your counsellor this!
Prerequisite 2: You must be able to live within your budget in future, i.e. only incur debts that you can pay. The first step is to try to find a solution with all creditors. Seek help from a debt counselling centre or a specialised law firm (obtain a legal aid voucher if possible (Beratungs- hilfeschein)).
It is important that you list all debts (even if you do not agree with the claims). Regular pay- ments must also be declared! Also declare anything of value state you still possess (e.g. car, life insurance policy, property).
If an agreement can be reached with all creditors (e.g. because third parties provide money), you do not have to start insolvency proceedings. If the settlement proposal is rejected, you will receive an official notification. You will need this in order to apply for insolvency proceedings. You should ask for help when filling in the application (form).
Stage 2: Debt settlement plan with help of court
(This stage is often omitted.)
The insolvency court decides whether you should make another attempt to reach an agreement. This may happen if the out-of-court settlement attempt only failed by a narrow margin. If the majority of creditors (in terms of heads and debt amounts) agrees to the plan, the insolvency court can „force“ the dissenting creditors to accept it.
Stage 3: Court insolvency proceedings
If stage 2 appears to have no prospect of success (or has failed), the court will open your insolvency proceedings and publish this on the Internet. An insolvency administrator will be appointed who has two main tasks:
- to check all claims that creditors register against you.
Please note: Claims may be registered as „arising from intentional unlawful acts“. This can also include unpaid maintenance. You should therefore check whether the claim is really based on an intentional unlawful act; if the allegation is false, you should file an objection with the insolvency court. If you do not lodge an objection, you will not be discharged from this residual debt. The deadlines for lodging an objection are very short. You should take action here immediately!
- to collect your attachable assets and attachable income and possibly also to reclaim payments made in recent months. If money is confiscated, the costs of the insolvency proceedings will be paid first.Please note: The information you provide in your insolvency application will be checked. If you have not declared your income or assets, your insolvency proceedings may fail.
Stage 4: „Good conduct phase“
At the end of stage 3, the insolvency proceedings are repealed by court order and the „good conduct phase“ begins. The attachable part of your income will continue to be confiscated. If you receive an inheritance, you must hand over half of it. However, you can also refuse the inheritance. You may only make payments to individual creditors via your insolvency administrator. It is also extremely important that you report immediately any changes in your family or financial circumstances, or if you change job or move or make a profit of over €100.
You can also apply for VIV proceedings if you are unemployed. However, it is important that you actively look for a job, apply for jobs yourself and accept any reasonable job. You must be able to prove that you are looking for work.
Part-time work is only acceptable if you still have to look after your children (e.g. because you are unable to find a place in daycare) or if you are no longer able to work for health reasons.
If you comply with these rules, the insolvency court will grant discharge of residual debt. You will then no longer have to pay any outstanding debts.
However, you must continue to pay fines and penalties. This also applies to debts arising from intentional unlawful acts and which the creditor has registered as such (e.g. damages or the repayment of money obtained by fraud). New debts incurred during the insolvency proceedings also not discharged and must be repaid.
Discharge of residual debt can be refused if you …
- have made false statements through gross negligence in the last 3 years before applying for a loan or public benefits
- have made false statements in the insolvency application
- have squandered assets or incurred unreasonable debts in the 3 years prior to submitting the application
- incurred new debts during the insolvency proceedings that you have not repaid, thereby damaging the insolvency creditors.
How long do insolvency proceedings take?
Insolvency proceedings last 3 years from the date they were opened. At the end, the court declares the discharge of residual debt
Attention: Be sure to keep this court order! The claims still exist. The creditors may also write to you. However, you are no longer obliged to pay. Enforcement measures are not permitted.
Does the procedure cost anything?
The public debt counselling centres generally offer their support free of charge. You will have to pay a lawyer‘s office if you are not granted legal aid.
Costs are incurred for the court proceedings. Apply for a deferral if you are unable to pay the court costs. The insolvency court will then defer all costs until the residual debt is discharged. If something can be attached, the deferred costs will be paid first.
If costs are still outstanding after the discharge of residual debt, an annual review will be carried out to see whether you can make reasonable instalments – but for a maximum of 4 years.
Note: All insolvency proceedings and the decisions of the insolvency court can be found on the Internet at www.insolvenzbekanntmachungen.de
