Debts

Every time you promise to pay or return money to someone we call this a debt. This may be your room rent or taxes or contributions to your health insurance, for example. 

Debts differ according to their nature and amount. 

Sometimes, however, someone just claims that you owe her or him a debt, even though it is not true. This is illegal, and you can take action against it.

Over-indebtedness means that you can no longer pay off your debts with your own money.

Never ignore bills or requests for payment. Otherwise your debts will grow larger and larger, because then you will additionally have to pay overdue fines and interest. 

Figure out your financial situation and consider which debts need to be repaid most urgently.

Contact the people you owe money to (“creditors”). Ask them if you can pay back the debt in “instalments” or ask them to settle for a reduced amount.

A debt counselling service can help you with this. They can tell you how to reduce your debt. We will be happy to help you find a debt counselling service.

This is possible but does not always make sense. Because it just means taking on new debt.

A loan will allow you to pay the money back. But then you have to repay the money for the loan, usually with added interest. And that leaves you with even more debt than before. A debt counsellor can tell you more suitable ways to reduce your debts. 

Insolvency means inability to pay.  It means that your debt burden is so large that you are unable to settle your debts even by repaying them in instalments. Having too many debts does not automatically make you insolvent. The insolvency procedure must be officially filed. Filing for insolvency is one way to get out of debt for a long term.

Ask a debt counselling service for advice. Try to find a good solution with the person you owe money to with the help of a debt counsellor. This is also known as “debt settlement proceedings.”

If the debt settlement proceedings don’t work, you can file for insolvency.

An insolvency procedure costs energy and you must not make new debts during this time. But once you get through the insolvency procedure, you will be debt free, usually after 6 years.

If you fail to pay a bill, for example, you will receive a request for payment. This is known as a reminder. 

If you fail to respond to this reminder, the person you owe money to can go to court. You will then receive an order for payment from the court by post.

If you fail to respond to this again, the court will send you an enforcement order.

After that, a court officer (“bailiff”) can come to your home and take away items of value - such as jewellery, for example - belonging to you (“seizure”). However, he may not remove certain personal items, such as clothing or your TV. Money can also be seized from your bank account. 
 
You may also receive a negative “Schufa” entry, meaning that a credit agency will record in a database that you have failed to pay your debts. With such an entry, it will be more difficult for you to sign another contract later, for example for renting an apartment or for a mobile phone. 

No, you will not be sent to jail just because of your debts in Germany. 

However, there are other reasons relating to money matters why you may have to face a prison sentence: For example, if you fail to disclose your financial circumstances, which you are obliged to do. Or if you fail to pay a fine that a criminal court has sentenced you to pay for a criminal offence. However, you can be certain that your personal situation will always be carefully considered, for example also whether you have no previous convictions.

No, nobody is permitted to do that. You are only obliged to repay the money, not to work off your debt.