On 1 July, 2014, a further reform of the insolvency law came into force in Germany. The goal was to enable insolvent consumers to clear their debt faster. For those affected, the reform enables bankruptcy discharge to be completed after three years, under certain conditions. However, 35% of the debt, as well as the legal costs, have to be paid within three years.
For the first time, the credit agency CRIFBÜRGEL has analysed consumer figures on the shortening of bankruptcy discharge procedures to three years. From July 1, 2014 to December 31, 2014, a total of 49,642 private individuals had to file for bankruptcy. 8.3 percent of these (4,111 private persons) managed to shorten their bankruptcy discharge to three years.
CRIFBÜRGEL notes that disproportionately more young people succeed in achieving bankruptcy discharge after three years. This is mainly due to the fact that this group has relatively less debt compared to other groups. Across all age groups, the average debt level is around 33,500 euro. For the under 30s, however, the value is much lower. Here, average debt is just under 15,000 euro. With increasing age, debts increase up to an average of 43,000 euro for German citizens in the age group 61 years and over.
The main causes of personal bankruptcy are closely linked to the income situation. There are six main causes (the "Big Six"), which are mentioned time and again when it comes to the causes or reasons for personal bankruptcy. These include unemployment and reduced employment, income poverty, failed self-employment, consumption behaviour inappropriate to income level, changes in family circumstances such as divorce or separation, and illness. The majority of bankrupt individuals are in debt especially to banks, mail order companies, insurance companies, government agencies, landlords, utilities and telephone companies.
In total, about 650,000 German citizens are currently in the probationary period and awaiting bankruptcy discharge. These individuals must meet certain obligations during the probationary period, in order to be able to be discharged from existing debts. This usually occurs through surrender of income earned above the seizure limit. However, not all citizens benefit from bankruptcy discharge, as this may be refused under certain circumstances. This is the case, for example, if the debtor breaches their duty to provide information and to co-operate during the proceedings, or is convicted under insolvency law.
For 2017, CRIFBÜRGEL expects approximately 88,000 personal bankruptcies. This would be the seventh consecutive decline, and the lowest level of private bankruptcy since 2005.