Private Assets

Measures to protect assets

The most important thing about “Insolvency Law”:

  1. Insolvency law defines various types of bankruptcy, from personal bankruptcy to bankruptcy. There are different legal regulations for these species.
  2. After the debtor has filed for insolvency, insolvency proceedings are opened, the aim of which is to release the debtor from the residual debt.
  3. As a means of prevention, there are measures to protect assets (also called “asset protection”).

Asset Protection: asset protection as a precautionary measure

Asset Protection or asset protection means measures which are designed to protect private assets from access to future creditors.

Particularly relevant measure for asset protection with sole proprietors or companies without limited liability, for example, a civil partnership (GbR), in which the entrepreneur is liable not only with the business assets but also with his private assets.

It should be noted here, however, that asset protection is only about future creditors; in the event of existing or foreseeable insolvency, asset protection measures are punishable. Accordingly, measures for asset protection may only be taken in advance as a precautionary measure in the event of future liability, never with regard to impending insolvency or if there is already a liability case.

Even third parties can protect themselves from foreclosure in their property, which is in the custody of the debtor. With the third-party objection suit, the foreclosed or insolvency creditor can be deprived of a seized object because it belongs to or belongs to the debtor rather than to a third party.

Over-indebtedness: which foreclosure measures are possible?

Once a person has become over-indebted, it is usually very difficult to get out of this situation. Over-indebtedness often results in further worries and anxieties about the future, which can significantly burden those affected. Immediately a visit from the bailiff threatens? Do debtors have to be afraid that their wages will be seized? What happens when you file for bankruptcy? These are all questions that many sufferers face and that are answered in this guide. 

Over-indebtedness is often a big burden for those affected.

Garnishment: What can be seized?

In principle, only certain parts of the assets and income of the debtor can be seized through foreclosure. This seizure protection is to avoid a so-called blight seizure of the debtor, which means that it must continue to be possible for him to provide for his own and possibly for the livelihood of his family.

Also, certain items such as furniture, which are necessary for daily use (for example, a refrigerator or a car that is needed for the trip to work), can not be seized easily. Possible items that can be seized, however, are luxury goods (for example, jewelry). These can then be sold in the course of an insolvency auction or a bankruptcy sale and the money paid out to the creditors.

Wage Garnishment refers to the seizure of the debtor’s salary. In this case, the employer of the debtor is required to calculate the attachable wage share, withhold and forward it directly to the creditors until the debt of his employee is settled.

However, for the seizure of wages, the creditor must first have applied to an enforcement court and received from him a seizure and remittance order.

An attachment of plots is particularly critical because it can attack the existence of the debtor. In the case of a pledge confiscation, the debtor loses access to his account, the account amount passes to the creditor, direct debit can no longer be redeemed and the debit card is recovered by the bank. 

A pledge stocking can be prevented by a P-account.

One way for the debtor to act is to convert his account into a seizure account (P account). Then the creditor can still seize amounts from the account, but only amounts that are above the attachment exemption limit, that means not the entire account amount is deducted, but the allowance is retained to the debtor. How high this contribution is prescribed in the garnishment table. These are available from the debt counseling service. 
An excerpt from the attachment table we have shown here for you:

Net wage monthly 
from Euro to Euro
Dependable amount 
at 0 dependent persons 
in Euro
1,200.00 – 1.209,9946.34
1,300.00 – 1.309,99116.34
1,400.00 – 1.409,99186.34
1,500.00 – 1.509,99256.34
1,550.00 – 1.559,99291.34

Affidavit (EV): information about your own assets

The affidavit (EV) (former name: Revelation) is a self-assessment in the form of a list of assets over the current own assets. It must be in writing and truthful and complete. The affidavit is an enforcement measure that creditors can apply for in order to gain insight into the assets of the debtor.

The deadline for submitting an affidavit must be adhered to as the creditor may otherwise request a civil arrest warrant against the debtor. Even if the affidavit contains incorrect or incomplete information, you may face a fine or imprisonment of up to three years.

Debt counseling: help for those affected

Over-indebted debt counseling can often be a good way out of the debt crisis. Debt counseling has the advantage that those affected are not left alone with their debts and the resulting worries and problems. In debt counseling, a debt counselor with professional advice is at your side to help you to lead a debt-free life as soon as possible. 

Debt counseling offers professional help to get out of over-indebtedness.

Public debt counseling offers, for example, the debtor and insolvency advice centers of the federal states and municipalities. This is free, but you have to expect several weeks waiting time.

A debt counseling service can also be obtained from non-profit organizations, the Employment Agency or a lawyer.

Types of bankruptcy

Private bankruptcy: Bankruptcy of private persons

Private insolvency, also called consumer insolvency, refers to insolvency law as the insolvency of individuals (private persons). They can, therefore, apply for personal bankruptcy.

All natural persons who are no longer solvent can usually apply for personal bankruptcy. However, there are some exceptions, for example, self-employed (for example, a doctor who has had his own practice) cannot apply for personal bankruptcy. An application for personal bankruptcy for self-employment is only possible under the following circumstances:

  • the person concerned is no longer self-employed
  • the number of creditors is under 20
  • there are no more salaries for the employees

Before individuals can file a petition for personal bankruptcy, they must try to reach an agreement with the creditors in an out-of-court debt settlement process. Without the attempt to settle out-of-court debt settlement, bankruptcy proceedings cannot open insolvency proceedings for personal bankruptcy.

Nachlassinsolvenz: bankruptcy by inheritance

In inheritance, not only assets but also possible loans and debts of the deceased can be transferred to the heirs. In order to prevent this, the heirs have to file a petition for insolvency with the competent insolvency court according to § 1980 Bürgerliches Gesetzbuch (BGB), provided that they can foresee in advance that insolvency due to the debt will occur. In the estate insolvency proceedings, there is then a separation between the estate of the heirs and the estate he received from the deceased.
The heir then takes on the position of the insolvency debtor vis-à-vis the creditors, but the bankruptcy proceedings protect the inheritor’s inherent assets so that only the estate itself can be used to settle the claims. However, as the cost of an estate-based insolvency procedure is usually relatively high, it usually makes more sense for the heir to defer the inheritance.

Corporate insolvency: insolvency in companies

Insolvency law refers to the insolvency of companies (corporations or partnerships), and colloquially bankruptcy. In contrast to personal bankruptcy, there is a duty for the managing director to file for insolvency. 
As soon as the case of insolvency or over-indebtedness has occurred, the managing director is obliged to file for bankruptcy within three weeks. If he fails to meet this deadline or if the insolvency petition is filed incorrectly, he commits bankruptcy and thus becomes liable to prosecution. 

According to bankruptcy law, companies have to file for bankruptcy in case of over-indebtedness.

What is the difference between insolvency and over-indebtedness?

  • Insolvency according to § 17 of the Insolvency Act: The debtor is insolvent if it is unable to meet its payment obligations due.According to bankruptcy law insolvency, therefore, exists when the payments have ceased because there are no more funds available to make the payments.
  • Over-indebtedness according to § 19 of the Insolvency Code: Over-indebtedness exists if the assets of the debtor no longer cover the existing liabilities unless the continuation of the company is predominantly probable under the circumstances.Thus, over-indebtedness refers to insolvency law if the claims of the creditors exceed the assets of the debtor. However, as this can often happen to companies over extended periods, there is an additional provision in bankruptcy law stating that there is no over-indebtedness if it is likely that the business will be continued. To what extent this is probable, an accountant can determine in individual cases.

Insolvency Benefit: Workers’ Right

According to bankruptcy law, in the case of insolvency of the employer, workers are generally entitled to insolvency benefit. The bankruptcy money serves as a compensation amount for the lost salary payment and is paid out by the Federal Employment Agency. The period for the payment of insolvency money, however, is a maximum of three months.

Furthermore, the failure of the salary payments by the employer under bankruptcy law must have occurred three months before the bankruptcy event (for example, before the insolvency proceedings were opened). The insolvency money is usually the full net salary. If there is a transfer of business during the insolvency proceedings, the employees must be informed.

International companies are subject to the European Insolvency Regulation (EuInsVO).

Bankruptcy: Bankruptcy with a high number of creditors

This form of bankruptcy occurs when the number of debtors is more than 19 people.

In the regular insolvency, according to bankruptcy law, a residual debt after 6 years can be achieved, but an attempt to out of court settlement in the bankruptcy rule is not necessary, in contrast to personal bankruptcy. In the case of bankruptcy, a rule insolvency procedure is carried out.

Bankruptcy: How is it going?

The insolvency administrator manages the income and assets of the debtor

In the event of insolvency, insolvency proceedings will be opened following the bankruptcy petition. In the case of private bankruptcy, bankruptcy law also refers to consumer insolvency proceedings or simplified insolvency proceedings. Corporate insolvency is usually a standard bankruptcy procedure. 

The insolvency administrator manages the income and assets of the debtor.

At the beginning of the insolvency proceedings, a trustee is appointed in the case of personal bankruptcy (in the case of bankruptcy, a bankruptcy administrator ). The insolvency administrator or trustee is commissioned by the insolvency court to administer the insolvency estate. This means he has access to the assets and income of the debtor to administer and distribute to the creditors. He should make sure that all creditors under § 1 of the Insolvency Act (InsO) are as equal as possible so that the claims of all creditors during the insolvency proceedings count the same and no creditor is preferred or disadvantaged.

Once insolvency proceedings have been opened, the protection of enforcement applies, which means that foreclosures may no longer be enforced against the debtor. The administration of assets and income of the debtor is the responsibility of the insolvency administrator.

The insolvency administrator also checks what amount the creditors of the debtor are entitled to according to bankruptcy law. In fact, there are cases where the creditor has to repay something to the debtor or to his insolvency administrator (since he manages the assets of the debtor). This is the case, for example, when a creditor receives payments from the debtor through foreclosure one month before the opening of insolvency proceedings. This is called incongruent cover in insolvency law.

Retention of the title – Obligation to return unpaid purchases

Retention of title means that when goods are sold, the goods remain the property of the seller until they are paid in full by the buyer. Thus, the seller in insolvency law according to § 47 of the Insolvency Act (InsO) is entitled to a so-called right to dispose of. In turn, this means that in the event of a buyer’s bankruptcy, the seller can demand the return of the goods that have not yet been paid from the buyer or his insolvency administrator, since he is legally still the owner.

This right of disposal can only be asserted by the seller (creditor) in writing by means of an application to the insolvency administrator. As a rule, this application should already be made at the beginning of the insolvency proceedings, since the insolvency administrator has to separate the property from the insolvency estate and return it to the respective sellers, which is not the property of the debtor but is still the property of the seller.

Residual Exemption: When is it possible?

In the case of insolvency, the goal is the discharge of residual debt after the insolvency proceedings.


The aim of the insolvency proceedings is usually the discharge of residual debt. This means that after a certain period of time after the bankruptcy, the remaining debts that are left over or could not be settled at the end of this period expire and the debtor is thus debt-free at the end of the insolvency proceedings. The time after the conclusion of the bankruptcy proceedings until the release of a residual debt is also called the conduct of good conduct.

For the behavioral phase, some obligations must be taken into account for the debtor:

  • The debtor must be in employment during this period or at least seeking a job
  • A change of residence or job should be reported to the bankruptcy court
  • The debtor should not make new commitments. It is not prohibited, according to bankruptcy law, to make new debts despite bankruptcy, but these can have a negative impact on the insolvency proceedings and jeopardize the discharge of residual debt
  • No payments may be made independently to one or more creditors. The insolvency estate may only be administered and distributed by the insolvency administrator or trustee

After a reform of the insolvency law in 2014, the following periods of insolvency law applicable to the discharge of residual debt:

After 3 years: when 35% of the debt and the total legal costs have been paid off

After 5 years: if at least the costs are paid off

After 6 years: regardless of debt settlement or assumption of legal costs

An exemption from residual debt is, therefore, possible at the earliest after three years, at the latest after six years.

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