German law · English information
Assets in the debtor’s possession do not necessarily belong without restriction to the insolvency estate. Suppliers, lenders and lessors must establish and prove their rights.
Ownership and separate satisfaction
Aussonderung concerns rights excluding property from the estate. Retention-of-title arrangements require examination of incorporation, identification, processing and resale. Absonderung concerns preferential satisfaction from security. Enforcement powers, allocation of proceeds and statutory costs must be considered separately.
Set-off and avoidance
A pre-existing set-off position may be protected, but statutory prohibitions, the timing of acquisition and avoidable creation of the position can prevent its use. Even validly agreed security may be vulnerable under insolvency law.
Practical preparation
Secure contracts, incorporated terms, delivery notes, serial numbers, inventory lists, security agreements and payment evidence. Coordinate use, release and realisation with the administrator. Do not remove goods from a business without establishing the legal basis.
Related information
Procedures overview · Creditor rights · Corporate insolvency
Official German Insolvency Code · Official StaRUG
Practical implementation
Establish ownership and security rights
Separation concerns assets outside the estate; preferential satisfaction concerns rights over particular estate assets or proceeds. The distinction affects procedure and recovery. Ownership evidence, effective terms and identification of goods are often decisive. Processing, mixing or resale can change the rights available. Extended retention of title and security assignments therefore require examination of the contractual and receivables chain, rather than reliance on a single invoice clause.
Monitor realisation and allocation of proceeds
Security does not always permit immediate self-help enforcement. Realisation authority, cost contributions and court measures need consideration. A creditor should be able to trace stock, valuation and proceeds. Set-off also has insolvency limits, particularly where claims were acquired near or after opening. Security enforcement, claim filing and proceedings against other obligors should be coordinated to preserve rights without obtaining double recovery. The expected net proceeds may differ substantially from the asset's headline valuation.
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: Loaned machinery remains on site
A company identifies its machine at an insolvent customer's premises. Ownership, contractual terms and any continuing use rights need review. Serial numbers and delivery records help identification. Removal should not be attempted without examining the legal position.
Example 2: Goods have been processed
Unpaid raw materials have become finished products. Processing clauses, security terms and actual production steps need assessment. A right to recover the original unchanged materials cannot simply be assumed.
Example 3: A bank expects all proceeds
A secured lender expects the full sale proceeds. Authority to realise, permitted cost contributions and priority must be considered. The accounting should show proceeds, deductions and the secured debt clearly.
Example 4: Mutual claims exist
A supplier owes a credit to an insolvent customer while holding unpaid invoices. Accrual, maturity, acquisition and possible avoidance issues need review before set-off. Bookkeeping entries cannot make a legally prohibited set-off effective.
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