Several thousand companies become insolvent every year, but private individuals are also affected time and again. If the current obligations can no longer be covered, private insolvency is imminent. But how is it actually, is a loan possible despite insolvency?
FAQ about credit despite insolvency
Can you get a loan despite insolvency?
It is not forbidden or impossible to get a loan despite insolvency, but it is not easy either. The risk of insolvency of the borrower is very high for the bank, therefore a loan is granted only very rarely. An alternative can be to get a loan from a private provider.
How long do you remain in the Schufa after a private insolvency?
The goal of a private insolvency is the discharge of residual debt. If it is granted or denied, this information remains stored for three years in the score of the Schufa and is communicated to the credit institution in the case of a credit request in the information.
When can you get a loan again after a private insolvency?
Theoretically, it is not forbidden or impossible to obtain a loan even during private insolvency. After private insolvency, a note on the granting or refusal of residual debt discharge is stored at Schufa for three years and communicated to the bank in the event of a credit inquiry. During this time it is not easy to get a loan. Because of the insolvency banks see an increased risk regarding an inability to pay. You can influence the bank's decision positively by proving financial good conduct, not having incurred further debts, having a regular income and being able to offer the bank further collateral, such as a guarantor.
Credit possible despite insolvency?
With the consumer insolvency proceedings and the standard insolvency proceedings, the law has developed a way in which insolvency can be terminated in an orderly manner. Privately indebted persons use private insolvency to get back on their feet financially and lead a regular life. Often the question arises whether a loan is possible despite insolvency, for example, to meet obligations. The discharge of residual debt, which stands at the end of the private insolvency, must be pronounced by the district court. But is it still possible to get a loan after insolvency?
Prior to this, the definition of insolvency and statutory regulations require that a six-year period of good conduct be carried out. Even if a loan is granted despite insolvency, no new debt may develop from it. If this is not guaranteed, the credit should be used after the insolvency proceedings. Whether a credit is possible despite insolvency is explained in more detail below.
This is important
During the entire period of insolvency, the debtor must live his life on the edge of the subsistence level, as he must pay all income exceeding this amount to the insolvency administrator. Only the garnishment allowance is available to the debtor, the amount of which is based on the number of dependents and other allowances.
The definition of insolvency and legal regulations
This is important
German law provides for various procedures for handling regular insolvency; the insolvency procedure for private individuals is called private insolvency. It is not forbidden by regulation to apply for a loan despite insolvency.
The insolvency definition refers to the debtor's total inability to meet his outstanding payment obligations to credit institutions and other companies. Both companies and private individuals can file for insolvency by definition.
The InsO (Insolvency Ordinance) regulates the procedure. The definition of insolvency states that in the end the debtor should be given a fresh economic start. This applies to private individuals as well as to companies, which can participate in economic life again after a financial reorganization by insolvency according to definition.
Once the insolvency proceedings have been opened, the insolvency administrator must ensure that no creditor gains an advantage over the other. The insolvency regulation prescribes two different insolvency procedures.
Legal entities or self-employed persons who have a large number of creditors to satisfy (minimum number of creditors is 20) are subject to regular insolvency proceedings. Persons against whom monetary claims from employment relationships are asserted also fall within the scope of regular insolvency. All other, private persons, belong in private insolvency.
There are two types of insolvency:
Credit despite insolvency – the rule insolvency
Whether in the case of a limited liability company, public limited companies or legal entities, it is usually either insolvency or overindebtedness that prevails as the reason for insolvency. A balance sheet must show that the liabilities clearly exceed the existing assets on the asset side.
Regular insolvency can be applied for at the local court, either by the debtor or by a creditor. In the case of corporations, there is a legal requirement that insolvency proceedings must be opened immediately in the event of insolvency. If this does not happen, the company fulfills the criminal offence of protracted insolvency.
Tip
In some circumstances, it makes sense to take out a business loan without Schufa to pay off any claims and thus avoid insolvency. The definition of insolvency and legal regulations presuppose that there are no more repayment options available.
When the district court has examined the grounds for insolvency and the decision is positive, the insolvency proceedings are opened. An insolvency administrator is appointed, who is immediately given full power of disposal over the entire insolvency estate. A list of creditors and assets is drawn up.
All creditors must make their claims in writing to the insolvency administrator. Now this checks whether the claims are legitimate. A creditors' meeting is held to present the situation of the company and to discuss the possibility of continuing the business.
At the creditors' meeting, a decision is made on the liquidation of the company concerned. The assets are then liquidated by the insolvency administrator. When all debts of the insolvency estate have been settled, the existing remainder is divided among the creditors. When a complete distribution has been made, the insolvency proceedings are cancelled by the district court.
If the person concerned is a legal entity, any limited liability company or joint stock company will be dissolved immediately. How long regular insolvency proceedings take depends on how many creditors there are and whether the business is to be continued. The type of available assets also has an influence on the insolvency proceedings. In the case of insolvencies of large companies, it sometimes takes years for the entire procedure to be completed.
Insolvency – credit still possible? The private insolvency
This is important
It is possible to take out a loan despite insolvency, but the repayment must be carried out with the available, non-garnishable funds. However, the non-garnishable income portion is usually not high enough, so that a loan is not granted despite insolvency.
If insolvent private individuals are completely overburdened financially, private insolvency proceedings have existed since 1999. Any private person can apply for this procedure at the district court if there are less than 20 creditors.
If a consumer wants to go into private insolvency, the debt counseling office can be a first port of call. The first step is to draw up a list of all debts and creditors, after which an out-of-court settlement must be initiated. Only if this fails, the private insolvency proceedings are opened and the six-year good conduct period begins.
Of course, the Schufa is informed about the private insolvency. After the Schufa has been notified of the private insolvency, the debtor is considered unable to pay. Often, an affidavit has already been submitted before the Schufa was notified of the private insolvency. Whether a loan is still granted after insolvency proceedings depends on where the application is filed. A loan after insolvency proceedings is usually arranged through private credit providers. These do not have as strong conditions as banks and often even allow a loan despite insolvency.
In the event of private insolvency, a six-year period of good conduct must first be completed. In this case, all financial circumstances must be disclosed and debts must be settled to the best of one's ability.
The goal of private insolvency is the discharge of residual debt and this must not be jeopardized by a loan despite insolvency. Who wants to take out a loan despite insolvency, must be clear about the general conditions. The borrower must be able to repay the loan despite insolvency, otherwise the debt will increase due to the loan after insolvency.
Tip
However, most banks consider people who are insolvent to be insolvent and credit despite insolvency is almost never granted. To make a loan possible despite insolvency, there is the option to bring private credit providers on board. These either arrange loans from private individuals or provide the money themselves. In this way, it is also possible to get a corporate loan without Schufa, which can mean avoiding insolvency.
Car financing despite residual debt discharge
A car is indispensable for many people, which is why car financing is so popular. But car financing is also possible despite residual debt discharge? Yes, if the liabilities can be regulated, nothing stands in the way of car financing despite residual debt discharge. It must be remembered, however, that the debts must be paid from the available, non-garnishable income.
Possibilities of a credit after insolvency
Attention!
Even after insolvency, it is not easy to get a loan from a bank. A granted or denied residual debt discharge is stored at Schufa. If a bank inquires about your creditworthiness there, it will be given this information. This can lead to the fact that it classifies the risk of an insolvency as too high and refuses the credit.
Even after a private insolvency, it is not necessarily easy to get a loan. Although the private individual may be considered debt-free due to the discharge of residual debt and should be able to participate in economic life again, this does not mean that he or she is automatically classified as creditworthy. The reason for this is that Schufa stores data regarding insolvency and, in the event of a credit request, will release this information to the lender.
Schufa stores the announcement of a discharge of residual debt until the insolvency court has ruled on it. If the discharge of residual debt is granted or denied, Schufa stores this information for three years. If a consumer wants to take out a loan after personal insolvency, the bank will of course check his creditworthiness. In the case of a registered granted discharge of residual debt, the bank will not necessarily look favorably on a loan despite being currently debt free. Because of the insolvency that you have already gone through, the bank will fear another insolvency.
A failed debt discharge makes one's credit rating look even worse after a private insolvency. The continuing debts may cause the financial institution to reject the desired loan. The residual debt increases the risk that the debtor will not be able to pay the new loan because he is still struggling with the old debt.
So you can positively influence the credit institution:
With the residual debt discharge you are debt-free and have not incurred any further debts since then