If you have debts, this is called indebtedness. You do not necessarily have to be in payment difficulties. However, if your expenditure exceeds your income and you can no longer pay your bills, this is known as over-indebtedness.
Debt counseling
Do you have debts and can't pay them back? You don't know what you can do to reduce your debts and are looking for help?
The most important facts in brief
Debt counseling is a form of assistance for people who find themselves in a financial emergency and can no longer get out of the situation on their own. These financial emergencies can be existing debts, but also impending debts, for example if installments can no longer be paid due to unemployment, illness or divorce.
The debt advice centers offer affected people the opportunity to receive financial, psychosocial and legal advice.
Who is eligible for debt counseling?
Debt counseling is available to people who have financial difficulties and can no longer get out of over-indebtedness on their own. You can seek advice from a debt counseling service at the very first signs of financial difficulties. For example, if you often overdraw your account, urgent purchases can only be made in installments or you are frequently unable to pay bills. Debt counseling can also help you if you are at risk of over-indebtedness, for example due to a job loss, divorce or illness.
Further information on debt counseling
The first task of debt counseling is to help you pay your rent, energy and living costs. The debt counseling service will get an initial overview of your current debt situation.
It is helpful if you provide all the necessary documents (such as bills, letters, reminders) and ideally prepare a list of creditors. An overview of your income and expenditure will then be drawn up together with you.
On this basis, the debt counselor will work with you to agree on specific goals, such as drawing up a debt relief plan.
The debt counselor will help you to take the necessary steps. It provides support with legal issues and helps you to cope better with what is often a very stressful situation.
Your debt advisor will help you to compile all the important documents. It helps if you bring the following documents with you to your appointment:
- Initial overview of your income and expenditure
- Invoices and reminders
- Letters from offices and authorities
- Dunning notices and enforcement orders, letters from bailiffs and bailiffs
- Letters from creditor representatives (e.g. lawyers and debt collection agencies)
Important: Always open all letters you receive. This is the only way for your debt advisor to get a good overview of your current situation and be able to help you. Depending on the advice center, someone will also open your mail together with you and sort the relevant documents with you.
The debt counseling process is usually as follows:
- Making an appointment with the debt counseling service
- Initial consultation
- Discussion of measures to secure your livelihood and debtor protection
- Review and planning of the household budget and listing of debts
- Negotiations with creditors
- If necessary, preparation of insolvency proceedings and support in applying for personal insolvency
During the consultation, you describe your current situation and how you got into over-indebtedness. Over-indebtedness can affect anyone. Every situation is different and you will receive the help you need according to your situation.
Reputable counseling services are usually free of charge. There are free counseling services for people in and over-indebted throughout Germany. Use this link to find the advice center online or in your area.
State funding:
Most counseling centers receive subsidies from the federal states or the cities and municipalities in which the people seeking advice live. However, state funding alone is often not enough to provide counseling free of charge. In some federal states, those seeking advice with higher incomes therefore have to pay a small personal contribution. The providers of the advice center almost always also contribute their own funds.
Caution:
Particularly on the Internet, some counseling services lure you in with the fact that you will receive "immediate and fast" advice, a "free initial consultation" or a "free debt analysis". Such bait offers are often linked to expensive consultancy contracts. Always find out about the total cost of a consultation before you sign a contract. This page gives you tips on how to recognize dubious offers.
Find a counseling center online
You can search for suitable advice centers here.
Frequently asked questions about debt counseling
If you have decided to make an active effort to improve your financial situation, you should be prepared for a longer consultation period. Over-indebtedness does not usually occur overnight. And debt relief is not usually achieved in the short term.
In order to talk about money, debts and the various interdependencies in everyday life, there must be a basis of trust. The first or second consultation often determines whether you can build up a relationship of trust with your debt advisor. If not, make it an issue. Perhaps talking openly about it will help to clear up any misunderstandings. It may be possible to change counselors.
The amount does not matter. If your monthly income is not sufficient to meet all your obligations (rent, energy, living expenses, loan installments) over a longer period of time, this is referred to as over-indebtedness. If you are unable to overcome your over-indebtedness yourself, you should arrange a consultation with a debt advice center - even if you are only worried that your money will not be enough in the future.
Many people find this step difficult. The sooner you seek expert advice, the sooner you will find a way out of debt.
The advice centers of the welfare associations, local authorities and non-profit organizations advise consumers free of charge on all questions relating to debt. Ask your job center or social welfare office for contact details.
Many advice centers have regular emergency consultation hours. You can go to these at short notice if, for example, you are threatened with having your electricity cut off because you can't pay your bills or you can no longer access the money in your current account.
The waiting time for a fixed appointment with the debt advice service depends on the advice center in question. However, it can take several weeks.
In 1999, the German Insolvency Code (Insolvenzordnung - InsO) created the possibility for private individuals to settle debts in court under certain conditions and to obtain a discharge of the remaining debts (so-called residual debt discharge). A prerequisite for the opening of insolvency proceedings is that you have previously tried to reach an out-of-court settlement (i.e. without the court) with your creditors.
As insolvency law is very complicated in many areas, the legislator has stipulated that a "suitable body" or a "suitable person" must accompany this attempt to reach an agreement. When applying for insolvency proceedings, this person must confirm that you have attempted to reach an agreement and that this attempt has failed.
- In order to be recognized as a suitable person, debtor and insolvency advice centres in many federal states must prove that they employ qualified staff and have extensive experience.
- Lawyers, tax advisors and auditors, for example, are usually recognized as suitable persons.