Rescission of Debt: Conditions and Procedure
Insolvency brings you out of debt, so far … almost! After all, it allows honest debtors a fresh start in their finances. However, there is a small detail, which must not be overlooked or forgotten: the Restschuld Librei! We show you in this article what exactly is meant by it, what are the concrete requirements and what you must not forget in any case.
The essentials in brief:
- Application simultaneously with insolvency proceedings
- Application for the waiver of residual debt only in writing
- Good conduct phase is decisive for residual debt exemption
- Good conduct and insolvency proceedings take between 3 and 6 years
- Residual debt waiver does not mean deletion of all your liabilities
So apply for the residual debt relief
Paving the way to personal bankruptcy is not an easy decision. If you submit the relevant application to your competent district court, you must also think directly about the remainder of the debt discharge. Although the exemption from residual debt only follows after the insolvency proceedings, both are to be applied for at the same time and in written form.
Remaining debt relief – the term arouses false hopes
What sounds like a license at first sight, however, is by no means the same: the deletion of all creditor claims does not lead to the exemption of residual debt. Although after the end of the insolvency proceedings even your Schufa entries are considered to have been taken care of, but these remain for a further 3 years thereafter.
Open claims of your creditors are merely converted into “natural bonds”, also known as imperfect liabilities. After the discharge of residual debt, these can still be paid voluntarily, but are no longer enforceable against the debtor over its assets. This only applies to the creditors who had claims against you as the debtor at the beginning of the insolvency proceedings. If you have incurred new debts during the insolvency phase, these are not affected by the residual debt relief.
In addition, any guarantors of the debtor are obligated, even after the debt has been waived, without being able to demand compensation from the debtor. It is also conceivable that agreements will be made between the creditor and the debtor on old liabilities, even though they were affected by the discharge of residual debt.
The meaning of a debt relief
Since 1999, the Insolvency Regulation provides that honest debtors can make a fresh start possible. In order to prove your probity as a debtor until the discharge of residual debt, you should not get into debt during the good conduct period. If you show goodwill through your participation, you can impair the insolvency and thus also the behavioral phase in your favor. Basically, this period is set at 6 years, but can be shortened to 5 or 3 years. In such cases, you will be provided with correspondingly earlier clearance of your debt.
Conduct period as a prerequisite
You yourself can play the crucial role in making the bankruptcy court shorten your period of good conduct. Before the regular expiry after 6 years, you have various instruments available to get to the residual debt relief faster.
Early Termination: Settle the creditor claims that are bundled in the bankruptcy as well as any ongoing litigation costs.
After 3 years: You can get the remainder of debt relief after half of the regular time by paying the procedural fees and 35% of the bankruptcy claims.
After 5 years: You can accelerate the procedure for your residual debt exemption by one year if you have at least paid the costs of the current insolvency proceedings after five years.
Conditions for a residual debt exemption
Your residual debt exemption requires proper conduct during the period of conduct. Prove your honesty and with it that you have earned the rest of the debt relief. For this you have to comply with the following rules:
- You are required to perform an activity or at least make an effort to do so. In the case of your unemployment, reasonable activities may not be refused without just cause, so as not to jeopardize your discharge of residual debt.
- Their remuneration must be assigned to the trustee, provided that they are attachable.
- If you act as a debtor to self-employment, you must make payments to your trustee.
- You do not make your payments to the claimant yourself, they are handled by your trustee.
- If you inherit during the period of good conduct, you must inform the trustee and give 50% of the value.
- You must disclose all your assets to the bankruptcy and trustee at any time.
- The trustee must be informed by you as well as the bankruptcy court about this, resulting in changes in your workplace and / or place of residence.
What endangers the discharge of residual debt
Residue clearance is a valuable opportunity, but it does not automatically provide you with the procedure of bankruptcy. If you are proven to violate certain conditions, give away your chance. Consequently, you will be denied a discharge of residual debt if one of these characteristics applies to you:
- You have violated your information and notification duties as a debtor or made false or incomplete information about your assets.
- In the past (up to 3 years prior to the bankruptcy or filing of an application) you have provided false or incomplete information in order to obtain credit or public funding.
- Your last remaining debt relief is less than 10 years back.
- Instead of repaying your debts, you have taken on new ones inappropriately or wereted your fortune. The period to be considered includes the year before and after the application for personal bankruptcy.
- You are prosecuted as a debtor for a criminal offense and convicted.
If you are denied the remainder of the debt relief, the possibility of personal bankruptcy exists only after the expiry of 10 years. So be sure to follow the rules of good conduct!
Keep in mind that you are obliged to provide information and information to your trustee. The release of residual debt depends on your cooperation and insight into the conduct phase. If you are unsure or have any simple questions, you should contact your trustee or the bankruptcy court. For these jobs, your concerns are probably routine and easy to answer. Do not endanger your residual debt relief by preferring to inquire about more than once.
The release of residual debt serves as a last resort and for people in futile financial position. At least theoretically, no creditor has to forgo his money through this rule. Even after insolvency and the discharge of residual debt, the debtor still has liabilities that he can settle. And that’s exactly what the idea is for:
A debtor should not least be informed by the “probationary period” (the good conduct period) during the bankruptcy phase, a more conscious handling of finances. By the trustee he is under special observation and has little room for maneuver. The mere obligation to keep to it strictly makes sense in the idea of the release of residual debt.
FAQ – Frequently Asked Questions
When can I apply for a debt waiver? How long does the procedure for the discharge of residual debt take? Do I have something to consider regarding the residual debt exemption? How can a residual debt waiver fail? Will I get rid of all claims through the discharge of residual debt?
When can I apply for a debt waiver?
At the same moment, if you apply for bankruptcy. Bankruptcy proceedings and the period of good conduct run parallel in time and the latter is largely dependent on your residual debt exemption.
How long does the procedure for the discharge of residual debt take?
This is linked to the duration of their insolvency proceedings. This usually takes 6 years, but can be shortened to 5 or even 3 years in many cases.
Do I have something to consider regarding the residual debt exemption?
Apply for this at the same time as the bankruptcy. There are a number of conditions that you must not violate. During the bankruptcy, a trustee will be at your side to answer all your questions.
How can a residual debt waiver fail?
Since your conduct is under scrutiny in the conduct-of-conduct period, you must adhere strictly to all the rules that apply in “normal” life: make statements that are true, leave the payment transactions to your trustee and do not claim any benefits.
Will I get rid of all claims through the discharge of residual debt?
That would be too simple: claims of all insolvent creditors to the residual debt exemption to “imperfect liabilities”. They can pay you voluntarily, but they are no longer enforceable against you. Claims by third parties (such as guarantors) still exist against you.