In 2018, 6.93 million people in Germany were considered over-indebted. The number has been increasing for five years.
Over-indebtedness is a state of excessive debt that the debtor can no longer reasonably eliminate from existing income or assets. The term over-indebtedness has emerged colloquially as well as through its use in special laws. In Germany, the term is defined as a possible cause for insolvency in the Insolvency Code (InsO), whose predecessor was the bankruptcy code from October 1879. The term is also defined in the context of estate insolvency .
All economic entities come into consideration as debtors ( private households , companies as well as the state with its subdivisions: federal states , municipalities , municipal associations , state-owned companies ). For legal persons and certain partnerships , the indebtedness under German insolvency law according to the legal definition in para. 2 InsO a reason for insolvency . In individuals and partnerships, the indebtedness alone no reason for insolvency, but rather only the insolvency .
All economic agents are overindebted if their debts exceed their assets.
This can happen , on the one hand, through a decrease in the value of assets, and, on the other hand, through an increase in debts ( e.g. compound interest effect, exponential growth in debt due to increasing new borrowing ).
Causes of indebtedness can on the one hand financial collapse ( impairment of the assets such as by losses in securities , losses on real estate ) or revenue declines ( decline in sales or excessive investment risks for companies, unemployment , short-time work , loss of income during job changes , divorce and illness in households), on the other hand, a continuous or abrupt increase in debt, for example through cumulative interest on debt ( compound interest ) or the so-called debt trap. Debt traps are borrowings, in particular consumer loans (“consumer debts”), in which uncontrolled debts arise and can grow (for example in the case of long-term obligations such as mobile phone contracts or hire purchase ). The compounding effect wears the basis of mathematical laws to an exponential growth of debt and over-indebtedness may cause.
Causes from the perspective of the debtor
The study Debt Compass of SCHUFA Holding AG, the main causes of indebtedness presented from the perspective of debt in 2007 is as follows:
- Unemployment and the associated loss of income (29.3% of all cases),
- Change in living conditions due to divorce or death of the partner (13.5%),
- Illness , addiction or accident (9.8%),
- Failed self-employment , business start-ups (9.5%),
- Inefficient housekeeping ( consumer behavior ) (8.6%) or
- Failed real estate financing (4.0%).
The study notes that these do not always meet objective standards. For example, in cases where a divorce date was given, only a quarter of the divorce date was within the past two years since the counseling center was contacted. Subjective causes such as consumer behavior or a lack of economic education are systematically underestimated in surveys in debt counseling. Also, the clientele of debt counseling is not necessarily representative of the totality of the over-indebted.
In a significant proportion of the counseling cases (around 10%), debt problems can be traced back to the inadequately trained ability to handle money. The offer of the trade to buy on a loan basis, or the credit institutions to overdraw the account , often tempts to spend more money than is taken in. Obviously, it is more difficult to keep track of your living expenses than it is to take out loans . Also, the cashless payment is a debt trap. Since today the consumption of goods and services usually no longer coincides with payment (fee invoices only come a month later, automatic debits from the account), the idea arises of being able to have unlimited cash reserves. In these cases, the people concerned are very surprised when they read the corresponding statements (such as cell phone bills) and then sometimes react with repression .
The study cited as part of the Debt Compass also looks at the distribution of the volume of debt among individual groups of creditors. Average debts (2007) by creditors without self-employed persons and persons with real estate debts:
- Credit institutions in the form of installment and credit facilities : 11,017 EUR = 48.8%
- Debt with debt collection companies : 2663 euros = 11.8%,
- Debts to public creditors such as tax offices : 1620 euros = 7.2%,
- Debt with private individuals : 904 euros = 4.0%,
- Debt with landlords in the form of unpaid rent payments: 885 euros = 3.9% or
- Debt to telephone companies (telephone, internet, cellular): 664 euros = 2.9%.
In total, this resulted in an average debt of EUR 22,555. If a person has debts to another private person, these personal loans amounted to 13,400 euros. The persons liable for maintenance had an average arrears of 6,700 euros for maintenance obligations that were not performed .
In terms of volumes, bank debts are clearly overrepresented because very large amounts can accumulate here in individual cases, especially in the case of failed real estate financing, business start-ups or previous debt rescheduling . Those who fall into the debt trap not through failed individual projects, but through regular excessive consumption (cell phone, energy / utility, mail order company, rent, etc.) usually have significantly lower outstanding debts in terms of value. In particular, the statement that is often made in the media that mobile phone bills contribute to the over-indebtedness of young people is not supported by these figures.
Causes from the perspective of the creditors
From the perspective of creditors, too, changes in income are the most common triggers for over-indebtedness. From the creditor's point of view, however, the following points are also causes of over-indebtedness (which from the creditor's point of view is perceived as a credit default):
- General financial education : Typically, the overindebted people have a relatively low level of education. According to this, only 3.8% of the over-indebted were academics, 31% had no completed vocational training, 65% had completed an apprenticeship.
- Inappropriate propensity to consume: There is not always a willingness to reduce consumption when income falls. In many cases, those affected try to maintain their standard of living and take out loans for this purpose. This also applies to failed real estate financing. In many cases, the property is not sold over the counter immediately after separation or unemployment. Instead, it is hoped for improvement and increasing indebtedness is accepted.
- Fraud: The analysis of the loan records of bad loans shows that borrowers (especially if the level of indebtedness no longer allows further credit expansion) do not always play “with open cards”. If the information in the self- disclosure is incorrect or even incorrect income documents are presented, it is not possible for the banks to recognize impending over-indebtedness in advance.
About two thirds of the bankruptcies of German medium-sized companies are overindebted. In over 90% of these cases, over-indebtedness is caused by operational losses; From direct business activity, the income is lower than the expenses over a longer period of time, so that no profits can be generated. The resulting losses reduce equity , so that liquidity bottlenecks can usually only be eliminated by increasing debt. In the case of large companies , corporations and the self-employed, other reasons may also prevail. Further reasons for over-indebtedness of companies can be value adjustments on investments, necessary high provisions , other risk provisions , contaminated sites and significant payment defaults .
The causes of excessive national debt are mostly structural and permanent budget deficits of a state, i.e. a crisis-ridden structural difference between government spending and government revenue . Other reasons are also spending on rearmament , for war , for Reparations payments, for not financially sustainable infrastructure projects, social services and personnel costs with the state and generally also corruption and inefficiency in the context of government spending.
Recessions regularly lead to a burden on the state budget due to a decrease in income-related taxes (progressive income tax, corporation tax) with a simultaneous increase in social spending ( automatic stabilizers ). In addition, an economic or financial crisis can result in high expenditures to stabilize the economy, secure social peace and rescue companies and lead to higher national debt.
The main causes of crisis-ridden low government revenues are often to be seen in too low taxes, the tolerance of inefficiency and corruption in tax collection and in the state apparatus as a whole.
If a state defies its structural and permanent deficits first and / or lowers not return and instead repeatedly with significant debt shots financed, the interest and repayment burden of these debts recordings according to experience more and more, even the cause of structural budget deficits of a state to read to negative primary balances of State budget .
When examining the issue of over-indebtedness, a distinction must be made between whether the debtor is a private person, a company or a state.
|Divorce, separation, death||18.1%||13.2%|
|Illness, addiction, accident||18.2%||15.8%|
There is no uniform definition of overindebtedness for private individuals within the EU. In Germany, the Federal Ministry of Family Affairs speaks of over-indebtedness in private households if their "income over a longer period of time after deduction of the cost of living is not sufficient to repay debts on time despite the reduction in living standards." The ministry is therefore concerned that households with no assets only use their income to repay debt and reduce their spending structure in such a way that this is accompanied by a reduction in the standard of living. However, if there is still available assets - and not already used to secure the loan - assets that are not necessary for a modest lifestyle must be sold in order to reduce debt.
According to current law, minors cannot enter into any legally binding obligations of their own that lead to debts without the consent of their parents ( No. 8 BGB). Unauthorized debts of minors in the form of account overdrafts are therefore excluded, as is the establishment of payment obligations as a result of a loan contract . However, a supply and indebtedness risk provide continuing obligations is where the amount of the monthly amounts is not established or is capped ( cell phone contracts ).
In the case of private households, the question arises as to when over-indebtedness occurs. The measure here is the income of a household on which the debt is to be based. The UK Task Force on Tackling Overindebtedness assumes that a consumer credit ratio of 25% of gross income poses a massive risk of getting into financial difficulties. In Germany, household sciences give a value of 20% of the gross household income, which the sum of all debt obligations should not exceed. The “credit advisor” of the savings banks advisory service even recommends exercising caution if the credit rate exceeds 10% of household income for small and medium incomes. Ulf Groth provides a definition that is not quantified but is based on household level. "Over-indebtedness exists if, after deducting the fixed cost of living (rent, energy, insurance, etc. plus food), the remainder of the monthly income is not sufficient for the installments to be paid". In France, over-indebtedness is described in Article 1, Paragraph 1 of the “Loi Neiertz” as the debtor's obvious inability to meet his non-professional obligations.
The credit reference agency Creditreform , according to some 6.5 million adult German were not in 2010 be able to pay off their loan obligations (installments); that was 300,000 more than in 2009. "The austerity measures planned by the federal government as well as other factors - such as rising housing costs and the rise in precarious workers - threaten to trigger a renewed overindebtedness situation." The loss of one's job is the most important trigger for financial bottlenecks. The increasing financial burdens for health and old-age provision or rent also left less scope to repay existing loans. With younger adults in particular, money is more loosely in their pockets again during the upswing; the willingness to take out new loans is also increasing.
Over-old age indebtedness has continued to gain in importance. In 2018, around 263,000 people in Germany aged 70 and over had to be classified as over-indebted (+35% compared to 2017). The problem of old age over-indebtedness will increase in the future. The number of younger over-indebted consumers (under 50 years of age) has decreased almost as significantly. Housing in large German cities has in many cases become a risk of poverty, and in any case the risk of over-indebtedness. Unemployment (share in 2018: 20 percent) and failed self-employment (8 percent) have lost their importance in the long term. Illness / addiction / accident (share in 2018: 16 percent) and inefficient housekeeping (share in 2018: 13 percent) have increased.
If the prerequisites for the offense are met, deliberate or negligent over-indebtedness ( bankruptcy ) can be prosecuted if creditors are harmed as a result ( StGB ). This can be the case with over-indebted individuals as well as with companies, but not with over-indebted states.
Legal situation in Germany
In terms of formal law, the legislator has tried to define the concept of over-indebtedness for the purposes of the corporate crisis in the Insolvency Code (InsO) . After that is a requirement that the assets of the debtor, the existing liabilities not covered, unless the continuation of the company is highly likely in the circumstances ( para. 2 InsO). The law has thus returned to the two-tier concept of over-indebtedness, as it was still represented under the previous bankruptcy regulations. As a rule, the assets are compared with the debts. If the debts exceed the assets ( assets ) and the equity is therefore mathematically negative, there is no over-indebtedness only if there is a positive continuation forecast. The equity ratio is an essential factor in assessing the creditworthiness of a debtor, which in turn is decisive for whether loans are granted at all and on what loan terms .
Over-indebtedness can therefore be understood as a condition of debtors that, on the basis of excess debts over assets, does not promise any positive development for the future either. For companies, an over-indebtedness balance sheet must be drawn up, which contains the realizable assets according to liquidation values and compares them with the actual debts. If this results in a debt surplus and a continuation forecast turns out to be negative due to the cost and sales planning, the prerequisites for over-indebtedness under insolvency law according to Section 19 (2) InsO are met. This over-indebtedness balance sheet is not based on the accounting regulations ( Commercial Code , IFRS ), but takes realizable assets into account. Assets that have to be shown in the commercial balance sheet due to a legal obligation to capitalize , but are worthless at the time the overindebtedness balance sheet is drawn up, are not taken into account.
Special regulations provide for certain consequences for corporations if preliminary stages of over-indebtedness are reached. In the case of a GmbH, a shareholders' meeting must be called if half of the share capital is lost ( (3 ) GmbHG ). A comparable regulation for stock corporations is contained in (1 ) AktG . A violation of this can lead to civil liability and criminal liability ( GmbHG, StGB - bankruptcy ) via (2) BGB .
Legal situation in Switzerland
An interim balance sheet must be drawn up in the event of "well-founded concerns about over-indebtedness"; this is checked by the auditor ( Paragraph 2 Clause 1 OR ). Without prior - on indebtedness receiving notification, can then - with some exceptions prosecution of bankruptcy (192 Art. To open SchKG in conjunction with Para 1 sentence 1 OR.).
Legal situation in Austria
In Austria there is no legal definition of the term "over-indebtedness", the procedure is regulated in Insolvency Code: Over-indebtedness is a reason for insolvency in partnerships whose unlimited partner is not a natural person (e.g. a GmbH & Co. KG ), legal entities and estates, So not - like the insolvency - a general reason for bankruptcy. According to a basic decision of the Supreme Court, there is significant over-indebtedness under insolvency law only in the event that
"The forecast of the continued existence of the company is unfavorable, ie the liquidation or insolvency is probable and that [...] assets to be valued not according to continuing values but rather liquidation values are insufficient to satisfy creditors in the event of liquidation. Therefore, even in the case of arithmetical over-indebtedness, for example as a result of the extensive loss of equity, there is only maturity for bankruptcy if a positive continuation prognosis cannot be made. "
The future-oriented perspective is therefore central to Austrian insolvency law: If it can be assumed that the company will be able to improve its precarious financial situation in the foreseeable future and will remain liquid, the insolvency reason “over-indebtedness” does not exist.
In addition to inheritance, the testator can leave all debts to the heirs by way of universal succession . This is not a problem as long as the inheritance assets exceed the debts to be inherited. Here, too, the law contrasts debts with assets. The heir must be liable for these debts with his own property if he takes on the inheritance and becomes the legal successor of the testator according to (1) BGB. In order to protect the heirs from the debts and the resulting liability consequences, there is inheritance bankruptcy. This is a special form of insolvency that releases the heirs from liability with their own assets. The heirs then do not have to be liable with their own assets for debts that have passed to them due to the death of the testator. In addition to insolvency, bankruptcy is also triggered by over-indebtedness ( InsO). The heirs can only apply for such a procedure once the over-indebtedness of the estate has been established. From a financial point of view, it makes sense for the heir to turn down the inheritance .
The risk of a state becoming overindebted is increased if there is also a high currency risk in addition to a high country risk . A heavily indebted state may be forced to take on its future national debt in foreign currency (so-called original sin ). A devaluation of the domestic currency (and the associated increase in national debt in domestic currency units ) or an appreciation of the foreign currency (in the case of foreign currency loans ) can significantly accelerate the process of over-indebtedness. Conversely, a country whose currency is internationally accepted as a reserve currency can monetize an existing national debt.
With the state as the largest aggregate , it is difficult to determine the state of over-indebtedness. The stability criteria (convergence criteria) of the Maastricht Treaties on European Economic and Monetary Union and follow-up agreements provide a starting point. These stipulate that, as a prerequisite for joining the European Monetary Union , the member states must meet two objectives in order to limit their public debt. On the one hand, the annual public budget deficit must not exceed 3% of gross domestic product (GDP) and, on the other hand, the public debt (cumulative budget deficit) must not exceed 60% of GDP. If these targets are exceeded only marginally and only for a short time, it cannot be said that a state is overindebted. In the case of excessive and long-term excess, as in the case of Greece, however, the state of sovereign debt is likely. In the case of Greece, with a deficit of 15.4% (2009) and 10.4% (2010) and a debt level of 127.8% (2009) and 142.8% of GDP (2010) with only low growth opportunities for GDP there are already talk of over-indebtedness. The measure in the state sector is therefore the value of all goods and services produced in a state in one year, expressed in GDP as a symbol for the economic strength of a state.
Another measure of the over-indebtedness of states is the annual export revenues. The foreign debt must not exceed 150% of the export revenues if state finances are to be secured in the long term to maintain the financial flexibility of a state. If the national debt clearly exceeds the limit of 150% in the long term, one can speak of over-indebtedness, especially in countries with a low export level or less diversified export structures.
The state subdivisions - such as municipalities - also run the risk of over-indebtedness. The over-indebtedness can namely not only be determined in the double balance , but also in cameralistic public budgets. With these, it is important that there is a general reserve to be formed in accordance with Section 41 (4) GemHVO , which, as a residual, fulfills the task of municipal equity . If this general reserve has been used up in full for the purpose of balancing the budget , there is overindebtedness according to Section 75 (7) GemO NRW. However, over-indebtedness is not a reason for insolvency for the federal government , federal states , municipal associations and municipalities, because they are incapable of insolvency according to No. 1 and 2 InsO .
Overcoming the debt crisis
While defaulting debtors historically bonded labor or debt prison threatened, there is in modern societies, only the legal consequence that creditors assets or income of the debtor pledge can. The introduction of consumer bankruptcy in 1999 is an important element in over-indebted individuals. It enables over-indebted individuals to be released from the remainder of their debts at the end of a 6-year period of goodwill through a debt settlement plan agreed by creditors. After that, a new economic start is possible. When it was introduced in 1999, 1,634 cases were registered, in 2001 there were already 9,070 cases, and in 2011 the number rose to 103,289 (2010: 108,798) cases. At the same time, however, this also increases the chances that the households concerned will be freed from their burdensome debts.
Education in private households is the essential source for an independent lifestyle and for a responsible participation in society. General financial education - i.e. the knowledge and skills in dealing with financial services and consumer preferences - is an important basis for preventing over-indebtedness risks. Accordingly, the anchoring of general financial education in school and extracurricular education is of central importance.
For people who are affected by over-indebtedness, there are offers of help from debt counseling centers at charities , consumer advice centers or municipalities . Over-indebted people then have the option of entering into consumer insolvency proceedings. Either an out-of-court settlement is reached by the counseling center (this succeeds in around 10% of the cases) or a judicial settlement succeeds. If the latter does not come to an agreement, insolvency proceedings will follow . This enables all debts to be canceled after six years. In this way, the formerly over-indebted gets a fresh start.
As an alternative to the help offered by the public debt counseling center, the help of a lawyer can also be used. While waiting times of one to two years are often to be accepted at the debt counseling centers before consumer insolvency proceedings are carried out, the proceedings can be carried out immediately with the help of a lawyer. However, using a lawyer is associated with costs that are only partially covered by the public sector.
Caution should be exercised with advertisements in newspapers or on the Internet that allegedly promise help for the indebted. Dubious providers often take advantage of the shame and hardship of over-indebted people, for example through “quick loans”.
Continuing insolvency offers over-indebted companies the opportunity to overcome the corporate crisis based on a favorable continuation forecast. Various restructuring measures such as the sale of unprofitable parts of the company, concentration on sustainably profitable business models, strengthening of the core business, a less risky investment policy, debt relief or equity-strengthening financially strong shareholders enable a continued existence and a new economic start.
According to the decision of the G8 finance ministers in June 2003, debt sustainability, as defined by the IMF and World Bank, is also to be the target for debt reductions for the Paris Club in future . Even in sovereign bankruptcy proceedings, the definition of debt sustainability would be crucial in calculating the extent of debt relief . Debt sustainability is when “a country (can) fully service its current and future debt without having to resort to debt restructuring and suspension of payments and without jeopardizing its growth.” Accordingly, debt sustainability is given when a state
- a debt ratio below 200-250% (at present value calculation ( Net Present Value ; NPV)),
- a debt service ratio below 20-25% and
- a debt to government revenue ratio of 280% and additional high tax collection efforts (tax revenue / GDP> 20%)
In order to avoid the risk of over-indebtedness, states must therefore change their economic policy in such a way that the above targets can be met.
Real estate over-indebtedness
In the case of real estate , too , one speaks of over-indebtedness if the nominal burden of mortgage liens exceeds the lending value. This situation cannot arise with an initial real estate financing , but only in the case of falling real estate prices , to which the loan values are adjusted. This was particularly the case with the housing bubble in the US during the financial crisis from 2007 onwards .
- Debt crisis
- Asset information (formerly the oath of disclosure)
- Declaration of objection
- Dieter Korczak: Overindebtedness in Germany between 1988 and 1999. Expert opinion on behalf of the Federal Ministry for Family, Seniors, Women and Youth, Stuttgart Berlin Cologne 2001.
- Anne Koark : Insolvent and still successful . Insolvency publisher, ISBN 978-3-9810954-1-8
- Nicolas Mantseris: Causes of Overindebtedness - Compendium and Allocation Scheme for Consulting Practice , Neubrandenburg 2010.
- Debt compass of Schufa
- Debtor Atlas from Creditreform
- Debtor Climate Index of Creditreform Boniversum GmbH
- Joint advice page of the Federal Working Group on Debt Counseling and the Federal Ministry for Family, Seniors, Women and Youth (Germany)
- Debt advice centers - regularly updated address database
- Michael Becker: Over-indebtedness report 2013 - washing machines, cell phones, mail order business: small loans drive customers into the debt trap in focus from October 21, 2013
- Maik Großekathöfer: Numbers, please! In: Der Spiegel . No. 42 , 2019, p. 60–64 ( online - October 12, 2019 ).
- Schufa, Debt Compass 2007
- Investigation by Dr. Wieselhuber & Partner GmbH, Insolvencies in Germany , May 2003
- Operation Mekong . "Laos is caught in China's debt trap." - Spiegel issue 41/2018, p. 94ff
- Creditreform Wirtschaftsforschung of November 13, 2018, SchuldnerAtlas Deutschland , 2018, p. 69
- Federal Ministry for Family, Women and Youth, October 2004, Over-indebtedness of Private Households - Information by Keyword ( Memento of November 25, 2011 in the Internet Archive ) (PDF; 42 kB)
- Task Force on Tackling Overindebtedness, Second Report, London. January 2003, Art. 4 Summary, p. 12.
- Hans Meiser, From the correct handling of credit. A guide through the debt labyrinth , Cologne 1995, p. 45.
- German Savings Banks and Giro Association. Money and Budget - Advisory Service of the Savings Banks, Der Kreditratgeber , 6th edition 2002, p. 33.
- Ulf Groth, Schuldnerberatung , 7th edition, 1984, p. 1990
- loi 89-1010 of December 31, 1989
- Creditreform dated April 7, 2011, Debtor Atlas
- Creditreform Wirtschaftsforschung of November 13, 2018, SchuldnerAtlas Deutschland , 2018, p. 16
- Creditreform Wirtschaftsforschung of November 13, 2018, SchuldnerAtlas Deutschland , 2018, p. 3
- Creditreform Wirtschaftsforschung of November 13, 2018, SchuldnerAtlas Deutschland , 2018, p. 4
- Creditreform Economic Research of November 13, 2018, SchuldnerAtlas Deutschland , 2018, p. 6
- Creditreform Wirtschaftsforschung of November 13, 2018, SchuldnerAtlas Deutschland , 2018, p. 29
- Government on the draft of the Financial Market Stabilization Act ( Memento of December 3, 2008 in the Internet Archive ) (accessed on November 4, 2008)
- OR Handkomm-Meister Art. 725 N 6 ff .; Hunziker / Pellascio, p. 209
- in particular deferment of bankruptcy (stock corporation law moratorium), filing a request for debt restructuring moratorium (Hunziker / Pellascio, p. 210)
- OR Handkomm-Meister Art. 725a N 2 ff .; Hunziker / Pellascio, p. 210
- cit. n. Clemens Jaufer: The company in crisis. Responsibility and liability of corporate bodies. 2nd edition Verlag Österreich, Vienna 2010 ISBN 978-3-7046-5531-8 , p. 107ff.
- IMF and World Bank, Debt Sustainability Analysis for the Heavily Indebted Poor Countries , January 1996, p. 2
- only applicable to debtor countries with a particularly high level of world market integration (exports / GDP> 40%)