German law · English information
Consumer insolvency applies to individuals under section 304 InsO. This information also helps businesses and creditors assess proceedings involving counterparties; our practice focuses on business clients.
Who qualifies?
The procedure particularly covers individuals who do not and have not carried on a self-employed business. Formerly self-employed individuals qualify if they have fewer than 20 creditors when applying and no claims against them arising from employment relationships. Currently self-employed individuals generally use ordinary proceedings.
Settlement and application
A prior out-of-court settlement attempt based on a plan is generally required. Failure must be certified by a suitable person or body under the statutory conditions. Complete schedules and declarations are needed. A recognised debt advice service may assist consumers.
Court settlement and discharge
The court may attempt a debt settlement. Substituting consent requires statutory majorities and safeguards. If settlement fails, insolvency administration follows. Discharge requires a separate application and compliance with duties; certain debts remain excluded.
Related information
Procedures overview · Creditor rights · Corporate insolvency
Official German Insolvency Code · Official StaRUG
Practical implementation
Identify the correct procedure and all creditors
Consumer insolvency is not the correct route for every individual. Current or former self-employment requires assessment under the statutory criteria. An out-of-court settlement attempt and the necessary certificate are particular prerequisites. A complete creditor list should identify legal bases, security and enforcement. Missing claims or inaccurate information can obstruct processing. Income and asset information must match the application and be updated when circumstances change.
Assess settlement offers and creditor rights
For a business creditor, a customer's consumer insolvency may change enforcement and payment arrangements. A settlement proposal requires examination of recovery, duration, security and actual capacity to pay. Claims with a special legal basis need careful filing; a label alone is insufficient. Discharge, opening proceedings and attachment protection are separate issues. The appropriate response depends on whether the business is acting as creditor, employer, secured party or contractual counterparty.
Four practical examples
The following scenarios are illustrative examples, not reports of client matters. The outcome depends on the facts and applicable rules.
Example 1: Formerly self-employed, now employed
A former business owner seeks consumer insolvency. The number and type of creditors and any employment-related claims need examination. Current employment status alone does not determine the correct procedure.
Example 2: A business receives a settlement offer
A creditor is offered small monthly payments. Duration, income assumptions, security and the insolvency alternative should be compared. A modest but reliable offer may be worthwhile, but consent should follow assessment.
Example 3: A claim may involve deception
A business suspects deliberate wrongdoing. Any special filing ground requires concrete facts. An unpaid invoice is not automatically a claim arising from an intentional tort.
Example 4: An employer receives conflicting notices
Payroll receives attachment documents and an insolvency notification. Procedural stage, authority and remittance obligations need coordination. Timely review can prevent inconsistent payments to creditors and other participants.
Discuss your situation
Tell us your role, the parties involved and any deadlines. We will check conflicts, agree the scope of the work and explain the fees before accepting instructions.