For a life without debt

The federal cabinet has cleared the way for reform of consumer insolvency law. According to the Federal Ministry of Justice in Berlin, the ministerial roundtable on Wednesday approved a bill presented by department head Brigitte Zypries (SPD) to simplify the debt relief process. Less bureaucratic than before, the procedure creates a socially just balance between the interests of creditors and debtors, Zypries stressed. It offers "the honest debtor a fair chance for a new start without debts".

In the case of residual debt discharge, which has been possible since 1999, every debtor is freed from the debts not paid in the insolvency proceedings if he or she tries for six years, under the supervision of a trustee, to repay as much money as possible to creditors. However, the current consumer insolvency procedure is too cost-intensive and too bureaucratic in view of the fact that 80 percent of debtors are not expected to have any relevant income, the ministry explained.According to the statement, there should be no more "debt relief at zero cost" in the future. Instead, the debtor is to contribute 25 euros to the costs of the proceedings at the beginning of the debt relief process and then pay 13 euros a month during the six-year period of good conduct. The costs of proceedings are to be reduced from about 2300 euros to about 750 euros per proceeding for consumers and from about 3900 euros to about 1470 euros for failed entrepreneurs. According to the Federal Ministry of Justice, the states are expected to save about 150 million euros a year in costs.The German government wants the bill to be passed by the legislature by spring 2008. It also contains provisions on the "insolvency resistance" of license agreements. If a licensor becomes insolvent, license agreements will remain valid even in insolvency proceedings, according to the new regulation.

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