Personal bankruptcy

The personal bankruptcy ( in Germany: Consumer insolvency proceedings, Austria: debt settlement proceedings ) is a simplified insolvency proceedings for the settlement of the bankruptcy ( insolvency ) of a natural person ( individual). It is often referred to as personal bankruptcy process. It should bring the creditors of an insolvent debtor uniform requirement proportionate satisfaction.

Consumer insolvency proceedings in Germany

In Germany, the Bankruptcy Act was replaced by the bankruptcy law in 1999. Since then, in the Insolvency Act ( Insolvency ) is regulated consumer insolvency proceedings.

If after completion of the bankruptcy proceedings still exist liabilities, the debtor may be exempted ( residual debt ). This possibility exists in Germany since the entry into force of the Insolvency Act ( Insolvency Act ) on 1 January 1999. Residual debt is optionally carried out six years after the court decision on the opening of the consumer insolvency proceedings. Upon entry into force of the second reform of the Insolvency Act from 1 July 2014, a debt relief is possible after three years if the creditors will receive 35% of their claim with the bankruptcy declaration. However, one should then also "well- behaved " have in the conduct phase, for which there is a settlement. This new legal provision was a reaction to the increasing indebtedness of economically independent adults.

Importance

Suitably, a consumer bankruptcy procedures for people who are insolvent or threatened with insolvency, which therefore its payment obligations can no longer meet and who want to achieve a financial restart on the personal bankruptcy process. The number of consumer insolvency proceedings has about tenfold from the beginning of 1999 to 2003 ( in 2003 it was approximately 33,600 procedures in Germany ). The reason for this is not only the growing debt, but above all the possibility of residual debt, which did not exist under the previous law. To a sharp increase occurred particularly by the fact that since the amendment of the Bankruptcy Act ( Insolvency Act ) 2001, a deferral of litigation costs is possible and destitute debtor may undergo a consumer insolvency proceedings. According to the Federal Statistical Office, a total of 103 289 consumer bankruptcy cases were opened in 2011. The average debt per case were in the years 2006 to 2008 at about 60,000 euros. Meanwhile, this sum is about 25,000 euros ( as at 21 October 2011).

In addition to lawyers ( "appropriate person " ) and such sites are authorized to provide advice on consumer insolvency proceedings, their suitability for this is recognized by the authorities ( " appropriate body "). Which bodies are capable of regulating the implementing legislation for the Insolvency Act ( AGInsO ) of the respective countries in conjunction with § 305 Paragraph 1 No. 1 Insolvency Act. These counseling centers include tax consultants, auditors, chartered accountants and the free working debt advice of local authorities and charities and certified consumer centers. It was previously approved by the District Court a certificate of eligibility for legal aid, the costs are borne by the state ( judicial office) and the client may need to be making a contribution 15,00 € including VAT (before 1 August 2013 10,00 € incl VAT) in accordance with No.. 2500 VV pay ( § 44 RVG). The lawyers can settle according to predefined sets. Without a counseling certificate, the client has to pay the usual rates of the lawyer. It should be noted that due to the subordination of the legal aid office in many jurisdictions no legal aid for personal bankruptcy advice is granted, as is referred to the free debt counseling.

Requirements

The multi-level consumer insolvency procedure applies to natural persons who are employed or engaged in any economic activity independently. In addition, it applies to such former self-employed who have less than 20 creditors and no liabilities arising out of employment with employees, § 304 para 1 Insolvency Act.

Procedure

The process can be divided into four steps:

Out of court settlement attempt

First, the debtor is asking all creditors to receive a current exposure of formation as a basis for the debt settlement plan to be created. According to § 305 para 2 Insolvency Act, creditors are obliged to give the debtor at their expense information. The debtor must by means of all liabilities detected debt settlement plan an out of court settlement ( insolvency comparison) try with the creditors. Succeed in reaching an agreement, the subsequent procedure is omitted.

This requires, makes sense with the help of a debt advice center, a debt settlement plan with the objective of debt relief, in which the services of the debtor are taken to all creditors are created. This plan can include all the rules in order to reach an agreement between debtor and creditor (s). If this plan is rejected by at least one creditor or operates after the announcement of the debt settlement plan, a creditor continue the foreclosure so the plan is considered a failure.

The debtor requires a certificate of the failure of the agreement out of court for further proceedings. These certificates may only issue under § 305 Paragraph 1 No. 1 Insolvency recognized bodies that are publicly recognized debt counseling agencies, lawyers, notaries, tax consultants and chartered accountants. Once a certificate from a recognized body about the failure of extrajudicial plan exists, the opening of insolvency application may be filed with the bankruptcy court.

Judicial debt settlement process

The failure of the out of court settlement attempt, the debtor may request the consumer insolvency proceedings the bankruptcy court. For this purpose, the document issued by a " suitable place " or a " suitable person " on the implementation and outcome of the out -of-court settlement attempt is required (see also § 305 Insolvency Act ).

With the writing on the official form to be submitted request to open insolvency proceedings ( § 311 Insolvency Act ) or immediately after this request, the debtor must submit:

Appropriately, should at the same time when it is needed, the application be made for the postponement of the proceedings.

Before the insolvency proceedings are opened, the Court reviewed whether the conduct of court debt restructuring plan has a chance of success. If this is the case, the plan and the balance sheet shall be sent to the creditors. This will have four weeks in which to comment. If the plan is not rejected by at least 50 percent of the creditors ( by number and amount of the claim ), the court may replace the consent of the creditors rejecting the request of the indebted person.

Simplified insolvency proceedings ( consumer bankruptcy)

If the previous efforts have failed, the simplified consumer insolvency proceedings are opened. Now the existing attachable assets of the debtor is utilized and distributed the proceeds, after deducting the costs of the proceedings to the creditors.

This consumer bankruptcy process is a rule against the insolvency proceedings considerably simplified procedure, which can even be carried out in writing under certain conditions. There a trustee is used, which creates the insolvency table ( creditors, debt level and debt basis ). The Trustee shall continue the task to exploit the ( attachable ) the debtor's assets. In Deadline creditor may apply for the refusal of any outstanding debts. The court denied the discharge of residual debt if one of the 290 Insolvency Act specified in § reasons is present. If no ( reasonable ) application for refusal of discharge of residual debt provided, the remaining debts will be announced. After the closing date and the distribution of mass, the process is canceled.

Residual debt relief procedure with good conduct period

Individuals have both the consumer insolvency proceedings as well as in regular insolvency proceedings the opportunity to apply for exemption from residual debt ( § 286 Insolvency Act ). The duration of the whole procedure from the date of opening of insolvency proceedings until the residual debt is 6 years. In this fourth part of the debtor assigns the attachable labor income to the trustee. This is distributed after deduction of legal costs to the creditors. During the conduct phase, the debtor's obligations of § 295 Insolvency: He must have appropriate employment or seek to promote those that give out half of the value of inheritances to the Trustee, notify each residence and workplace change to the bankruptcy court and the trustee and any creditors gain a special advantage. The Trustee monitors the obligations of the debtor only at the request of creditors ( § 292 ( 2) Insolvency Act ). In a breach of these obligations, in accordance with § 290 of the Insolvency Act, the remaining debts will be denied. Right to request this, only the creditors ( § 290 Insolvency Act ).

Costs

The court costs are determined by the value of the attachable assets and typically no 300, - to 500, - €.

The trustee receives for the insolvency administration usually 15 % of the bankruptcy estate, but not less than 600, - Euro (plus VAT ). In addition, the Trustee shall receive as compensation a percentage of incoming payments from the debtor (5 % for the first 25,000, - Euro, in addition staggered less); However, each year at least 100, - Euro (plus VAT ).

The cost may be at the request according to the rules for legal aid deferred, the application may be filed with the bankruptcy filing.

Reform in 2014

As the second stage of the planned in Germany and partially completed Insolvenzrechtsrefom occurred on 19 July 2013, the Law for the shortening of the residual debt relief process and the strengthening of creditor rights in force. The main component of the reform is valid only for processes that are registered after 30 June 2014. Thereafter, the parties may after three years instead be exempted from their remaining debts so far after six years - provided that they have paid at least a portion of the receivables. Condition for a so-called residual debt after three years is that they have paid at least 35 percent of the debt and the costs. Originally, even a quota of 25 per cent sufficient, but the parliamentarians saw by the property rights of creditors to greatly diminished. If only the costs have been paid, the future beckons a shorter period of five years ( § 300 Insolvency Act amended the proposal of the Legal Committee of the German Bundestag ). Otherwise, it remains the case that those affected as before sacrificing the seizable portion of their income for six years.

Statistical data

International Comparison: The DICE Report 2006 by Rigmar Osterkamp examined personal bankruptcies in selected OECD countries.

Debt settlement proceedings in Austria

In Austria, the bankruptcy of a private person is called debt settlement proceedings. Such a method is constructed in four steps:

Personal bankruptcy in Switzerland

In Switzerland, a private individual under Article 191 SchKG bankruptcy about themselves apply ( declaration of insolvency ). The bankruptcy judge opened against advance payment to the bankruptcy if there is no prospect of an after debt consolidation is. A declaration of bankruptcy, however, can not only be issued by a private individual; this is rather - the right of each debtor - in fulfillment of the other requirements.

With the bankruptcy drop the already completed seizures (also wage garnishments ) then. Creditors will receive a certificate of loss for the unpaid debts. The debtor can it only be operated again when he came to new assets or has wealth- income. The personal bankruptcy allows separate agreements with each creditor on the redemption of the loss certificate.

However, the personal bankruptcy no mechanisms are available as is the case in Germany or Austria. Thus, the responsibility for a successful debt alone is the debtor.

For existing certificates of a limitation period applies after Article 149a paragraph 1 SchKG and this is 20 years. The limitation of loss of certificates was introduced with the revision of the Bankruptcy Law in 1997. This is a real limitation. This has the consequence that with every interruption of action ( for example, with a new collection or a partial payment of the operated person) begins to run a new twenty -year period and that the statute of limitations must be expressly raised in the dispute over a certificate of loss claim.