Personal insolvency: process, duration and a fresh start after 3 years

Consumer insolvency (personal insolvency) enables over-indebted people to make a financial fresh start. After an out-of-court settlement attempt and the court procedure comes the good-conduct phase. At the end stands the discharge of residual debt, today already after three years.

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Your chances of getting your money back

At the end of consumer insolvency stands the discharge of residual debt: remaining debts are forgiven. Since the reform, the procedure up to the discharge only lasts three years (§ 300 InsO).

Before the application, an out-of-court settlement attempt with the creditors is required, which a recognized body certifies (§ 305 InsO). During the procedure you must fulfill certain obligations (e.g. efforts to earn income).

What you should do now

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1. Attempt an out-of-court settlement
With the help of debt counseling, an attempt is first made to reach an agreement with the creditors.
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2. File the insolvency application
If the settlement fails, you file the application to open consumer insolvency with the court, together with the certificate.
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3. Good-conduct phase
Over three years you fulfill your obligations (e.g. hand over garnishable income, efforts to earn income, cooperation).
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4. Discharge of residual debt
After three years the remaining debts are forgiven, the financial fresh start.

How to spot the scam

You conceal assets or income (endangers the discharge of residual debt).
Obligations (efforts to earn income, cooperation) are not fulfilled.
Dubious providers promise 'fast debt relief' for high fees.

Frequently asked questions

How long does a personal insolvency last?

Up to the discharge of residual debt, since the reform only three years (§ 300 InsO). Before that come the out-of-court settlement attempt and the opening of the procedure. During the three years you must fulfill certain duties.

What does discharge of residual debt mean?

At the end of the procedure the remaining debts are forgiven, so that you can start over debt-free. The prerequisite is that you fulfilled your obligations and did not violate any grounds for refusal.

How do I start?

With a recognized debt counseling center. It first attempts the out-of-court settlement with the creditors and, if this fails, issues the required certificate with which you file the insolvency application with the court (§ 305 InsO).

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General information for self-help, not legal advice (RDG). In case of a high loss or uncertainty: contact a consumer advice center or a lawyer.