When the solvency of an enterprise or an individual deteriorates, and creditors continue to demand the fulfillment of financial obligations under agreements and contracts, debts arise that cannot be repaid. To protect their own rights and interests, citizens use the services of lawyers who know how to properly initiate bankruptcy in Germany in order to solve all the problems that have arisen at the legislative level.
The law is the same for everyone
The Insolvency Law (§ 17, 18 Abs. Paragraphs 1 and 2 InsO) presupposes that both an individual and a legal entity can become bankrupt. Bankruptcy is declared by filing a written application (§ 13 INSO) of the debtor (legal entity) or creditor, containing a list of the claims sought. If the bankruptcy concerns a private person, then only the private person is authorized to submit such an application.
The order of actions of all interested parties and the mechanism of debt repayment are governed by the German bankruptcy legislation of December 1, 2001. With the right approach and compliance with all the instructions, a private person can get rid of financial obligations in 6 years.
Who is eligible to file for bankruptcy
If the debtor (legal entity) and the creditor, having gathered at the same table, understand that it is impossible to settle the current situation without a court, a completely logical question arises: what is the right thing to do to eliminate financial risks? The law states that both the creditor and the debtor have the right to draw up and submit a written application to the court, on the basis of which a case will be opened and proceedings initiated.
It is worth noting one important point of German law: if the head of the company understands that the threat of insolvency is imminent or the insolvency of the company has already been recorded, then within 3 weeks he is obliged to independently submit an application for opening bankruptcy proceedings. Otherwise, it is fraught with a large fine or imprisonment for up to 3 years.
The statement allows you to clearly understand to whom, how much and when the potential bankrupt owed. After the court has examined and approved the application, a liquidator is appointed who advises the head of the company on all financial and legal issues and helps to pay off all obligations.
What to do to declare bankruptcy
German law is loyal to individuals and companies who, for various reasons, are forced to solve financial problems in court. Only upon recognition by the court, a person whose insolvency is documented can be declared bankrupt and relieved of the debt burden. This process is quite tedious, but effective.
Bankruptcy or restructuring of a company
There are a number of specific mechanisms for declaring a company bankrupt. You can completely liquidate the company, or you can take steps for its financial recovery. In this case, a new firm is created - the legal successor, on the balance of which part of the property, employees, know-how is transferred, and the activity of the bankrupt firm ceases.
Due to the results of the work of the successor company and the property of the bankrupt company, all debts are paid off. Otherwise, the list of actions for declaring an enterprise bankrupt is similar to the actions for individuals who decide to declare their financial insolvency.
List of actions and documents required to declare bankruptcy
Declaring a private person bankrupt consists of three stages.
- First, the debtor and the creditor try to conclude an amicable agreement, according to which they jointly (in the presence of a notary and a lawyer) develop a plan to pay off the debt or defer payment. If the attempt to resolve the problem peacefully fails, the second stage begins - the judiciary is involved.
- When sending an application to the court, the debtor must submit a certificate confirming that the first pre-trial stage was unsuccessful (§ 305 Abs. 1 Nr. 1 InsO), as well as documents indicating the list of property and valuables, the amount of income, the list of creditors and the amount outstanding debt. All creditors must take part in the development of the document and strictly control that all their requirements are taken into account (§ 305 Abs. 1 Nr. 3 InsO).
- This is followed by simplified proceedings - the third stage of declaring the debtor bankrupt. The court verifies the payment of legal costs and appoints a liquidator, who receives the absolute right to dispose of the property and part of the income of the potential bankrupt.
Creditors' claims are satisfied on a first come, first served basis for 6 years. If no violations have been identified within the specified time, the applicant has the right to apply for the cancellation of the remaining amount of the debt (Antrag auf Restschuldbefreiung).
Punishment for revealing hidden income
While the proceedings on an open case are being considered, the person pays debts from the income received. However, it should be remembered that the amount protected from confiscation, which is intended for the primary needs of the debtor and his family members, is about 1,073 euros as of July 1, 2021; may vary slightly depending on the composition of the family.
Sometimes situations arise when the debtor does not pay anything to creditors at all due to low income, but still, after 6 years, he receives full release from financial obligations.
If the hidden income of the person who initiated the bankruptcy procedure is discovered, the court's decision may be revised, and sanctions provided for by German law may be imposed.
Lawyers advise not to allow such situations, and to record every cash receipt in order to painlessly survive this six-year period called Wohlverhaltensperiode.
Finally
Declaring a company or an individual bankrupt is an effective way to get rid of debt obligations. Therefore, if you did not manage to go to peace, you can safely draw up a statement of claim, submit the necessary documents to the court and follow all the instructions. German law clearly regulates the actions of creditors and debtors, so with strict adherence to all rules and regulations, you will get rid of debt obligations and be able to start a new life.
