1. When are you declared bankrupt in Germany?
In Germany there are two different possibilities: the debtor can declare himself bankrupt or a creditor can declare the debtor bankrupt. In both cases there has to be sent a request to the court which has to make sure that the conditions by law are fulfilled. Natural persons can be declared bankrupt when they can’t pay their debts anymore and have tried to come to a settlement agreement with all of his creditors. Companies can be declared bankrupt when they can’t pay their debts any more, if this is threatening or if the active property is less than the passive property in the balance.
If the judge thinks that the provisions for a bankruptcy are fulfilled he will appoint a preliminary insolvency administrator as a surveyor to find out if the presumptions for a bankruptcy are fulfilled and if there is enough money/property to cover the fees of the court and the insolvency administrator.
2. How long does it take to process a petition for bankruptcy in Germany?
No fixed time periods apply. A petition for bankruptcy regarding a private person is dealt within a few days up to a few weeks, depending of the judge. In case of a petition regarding a company the court appoints immediately (in between one day) a preliminary insolvency administrator.
3. What can you do if you disagree with the bankruptcy order by the court?
If you disagree with the order of the court, you can lodge an application to the court.
4. What happens if you are declared bankrupt?
The bankruptcy is declared by the court that appoints an insolvency administrator. Normally the bankrupt loses control and management of his assets by decision of the court and by operation of law. But there are different possibilities up to the possibility that the manager of a company can go on working with this company under supervision of the insolvency administrator.
5. What duties and powers does the trustee/insolvency administrator have?
The task of the insolvency administrator is to sell the assets of the bankrupt for the highest possible proceeds and to distribute the income correctly to the creditors in the manner prescribed by law. The insolvency administrator is paid from the proceeds of the assets. The trustee performs his task primarily for the benefit of the joint creditors. The bankrupt can engage a lawyer or adviser to represent his interests. The insolvency administratoris under the supervision of the court issuing the bankruptcy order.
One of the first things an insolvency administrator will do is to investigate if the capital stock of companies with limited liability (especially in case of a GmbH) is paid by the shareholders. If there are payments missing the shareholders will be asked (and if they don’t answer they will be suited) to pay the outstanding amounts.
6. What kind of obligations do I have as a bankrupt?
The bankrupt has several obligations, including a duty to provide information to the trustee/insolvency administrator. If the bankrupt does not cooperate sufficientlythis may have a negative effect on his personal liability.
7. How can I monitor the progress of the bankruptcy?
The bankruptcy order and all further decisions of the court are published by the court on www.insolvenzbekanntmachungen.de. There is no special insolvency register in Germany. The bankruptcy reports of the insolvency administrator in case of legal entities are not published, but creditors can have a look into via the court.
8. How long does a bankruptcy last?
Every bankruptcy is different. In practice, bankruptcy lasts at least a few months, if legal proceedings are involved, the bankruptcy may last longer. Private insolvencies last at least 36 months (see no. 12).
9. Can I make arrangements with my creditors?
It is possible to make arrangements with the creditors. But these agreements have to be made by the insolvency manager in case of companies and have to be approved by the court, in case of bigger claims by the assembly of creditors. Private persons that are declared bankrupt can make arrangements with the creditors by themselves whenever they want. But all creditors have to be involved to get the same rate according to their claimand have to agree.
10. How can an employee collect outstanding salary from his bankrupt employer in Germany?
The national employment office of Germany (BundesagenturfürArbeit=BfA) takes over the salary obligations from the date of bankruptcy and for the time three month before. This includes part of the outstanding salary, as well as overtime hours and holiday entitlement. There is a time bar of two months for sending the application to the BfA.
The employees are dismissed by the insolvency administrator, whereby he generally observes the shortest possible legal notice period of 2 or 4 weeks. After that period, the employment contract ends. Dismissal protection rules do not apply in the event of bankruptcy.
11. What important advice can be given to a company director in the event of imminent bankruptcy?
It is important that a proper administration has been kept and can be provided to the trustee/insolvency administrator. There is a time bar of three weeks in between the director of a company is obligedto declare himself resp. his firm. This period begins when he recognizes that there is one of the three assumptions is fulfilled. Otherwise he can be personally responsible for claims of creditors an can be punished for detention of insolvency proceedings.
12. Is there a special arrangement for a private person who is in danger of going bankrupt?
Yes, but it is no special arrangement. In Germany there is the possibility that a debtor can loose all his debts by decision of the court. First condition therefore is that there is an insolvency procedure and that the private person is declared bankrupt by a court order. In any case the debtor must try to obtain as much income as possible and, if this is not possible, the debtor must apply for a job. Every change of his domicile has to be told to the insolvency administrator. During those years, the debtor must live at social assistance benefit level. His income above this level will be sent to the creditors by the insolvency administrator (less his costs). If the debtor followed all rules in a period of 6 years there will be a decision by the court that the debtor looses all his remaining debts.
This period can be shortened. If all costs of the proceedings are paid, this decision will be issued after 5 years. And if the debtor pays at least 35% of all the debts and the costs of the proceedings he will get the decision of the court, that he has no debts any more, after 3 years.