Insolvency Law

Insolvency procedures are laid down in the Insolvency Regulations.

In order to be able to initiate insolvency procedures one needs an argument substantiating the insolvency. Such an argument applies when the debtor is unable to meet his financial obligations. In the case of legal entities excessive debts are also considered a reason for insolvency. The debtor himself may also file for insolvency should he expect that he can longer meet his financial obligations.

Insolvency is assumed when the debtor stops his payments. Excessive debts are assumed when the debtor’s assets no longer cover his existing financial commitments.

Both the creditor and debtor are entitled to file for insolvency – but not in the case of imminent insolvency -.

During insolvency procedures enforcement measures are not permissible.

If a creditor, during the last month preceding the filing of an insolvency, manages to enforce a security then this enforcement will not be effective on initiation of the insolvency procedure (§ 88 Insolvency Regulations). With regard to consumers insolvency this involves a three month period (§ 312 Sub. 1 Page. 3 Insolvency Regulations)

In order to initiate the procedure it is necessary that the debtor’s assets suffice to cover the costs of the procedure, i.e. that these costs are being covered by a third party or the government.

Of particular importance to the creditor is the exemption of remaining debts, which implies that once the debtor has been fulfilling his obligations over a period of six years he will be exempt from having to meet his commitments towards insolvency creditors.