Germany is a federal republic with 16 federal states and 84,3 million inhabitants. 6 millions of them (~8,5%) are over-indebted, that means they are not able to repay their debts.
Debt counseling has a long tradition in Germany. The first specialised debt counseling service was opened in 1977 by the municipality of Ludwigshafen.
Actually there are about 1.440 insolvency and debt counseling services with 3.500 employees in Germany. All services are listed in an online directory https://www.meine-schulden.de/beratungsstellen
The debt counseling services help annualy around 575.000 clients.
The debt advisors have predominantly trained as social workers. Economists, bankers, lawyers or psychologists support the services usually as part-time or free-lancer.
In Germany the provision of debt counseling services follows the subsidiary principle. This principle involves the sharing of powers between several levels of authority, with the guarantee of a degree of independence for a lower body or a local authority in relation to a higher body or a central government. Private debt issues should be dealt with at the most immediate or local level that is consistent with their resolution.
Therefore debt counselling is a matter for the municipalities. insolvency counselling is a matter of the federal states. According to social law (§ 11 para. 5 SGB XII and § 16 para. 2 SGB II), the municipalities are required to provide debt counselling. The Social Book XII defines the help to overcome particularly difficult life situations.
The federal states are responsible for financing the implementation of overall regulation procedures (insolvency counselling, § 305 InsO) . The legal basis for this is provided by the respective state implementation laws for the Insolvency Code of the federal states and the associated state ordinances. The financial requirement is regulated by Social Book II, §§15,16 (regulation on basic benefits for jobseekers).
In some federal states the debt counseling sevices are financially supported by the saving banks, e.g. saving banks North-Rhine Westfalia annualy 3 million Euro, saving banks Rhineland Pfalz annually 1,3 million Euro.
Providers of the debt counseling services are welfare organizations (Caritas, Diakonie, Arbeiterwohlfahrt, Paritätischer, Deutsches Rotes Kreuz), consumer protection agencies and the social services of municipalities. They are organised in the umbrella organization www.agsbv.de The advisors have their own umbrella organization www.bag-sb.de.
There are two ways for over-indebted households to settle their debts or get out of debt. The extrajudicial debt settlement and the judicial debt settlement by means of consumer insolvency proceedings, at the end of which there is a discharge of debt.
The out-of-court settlement attempt follows a specialized multi-dimensional holistic approach with budgetary, financial, legal and psycho-social advice. This attempt
always necessarily precedes consumer insolvency proceedings.
The judicial debt settlement is subdivided into two sections. The formal insolvency procedure and the discharge of debts period („well-behavior period“). Since October 2020 the duration of this procedure is always 3 years.
