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Reduce debt: Tips on how to become debt-free quickly

Reminders flutter into the house and more and more bills pile up on the table. What exactly can you do if you can no longer pay your bills? We show you what steps you can take to become debt-free again.

First of all, it's important not to bury your head in the sand and never put the bills in a drawer unopened. Instead, try to contact your creditors.

1. reduce debts: Deferment of payment and seizure protection account

A first step would be to inform the creditors that you are insolvent and ask for a so-called deferral. Another step is to set up a garnishment protection account (P-account) so that you are not threatened with garnishment. Because then you will no longer have access to your bank balance.

1.1 When can I ask the creditors for a deferral?

If you can foresee that your financial situation will improve again and you will soon be able to meet your payment requests, ask your creditors for a so-called deferral.

This means that you (the debtor) agree with your creditors on a later date on which the outstanding debt must be repaid. The amount of the claim remains the same. Only the obligation to pay, which would actually be due, is postponed. A period of 12 months is recommended.

Tip: A part-time job can help alleviate your current financial bottleneck.

1.2 Attachment protection account as protection against account attachment

Debtors who are threatened with account seizure should act quickly. This is because once the account has been seized, the person concerned can no longer dispose of their bank balance.

You should therefore apply to convert your current account into a garnishment protection account (P-account) at the latest when your bank has informed you of the impending garnishment. The conversion of a current account into a P-account must be free of charge.

Every account holder has the right vis-à-vis their bank to have their current account managed as a seizure protection account, a so-called P-account. A P-account is still a current account that is used for normal payment transactions, but offers unbureaucratic protection in the event of account seizure: Balances are protected up to an amount of 1500 euros per calendar month, further amounts (child benefit, etc.) can be released on proof.

According to the legislator, a P-account can be used like a normal current account, which means that cash withdrawals as well as transfers and standing orders or direct debits should be possible.

2 What to do in the event of insolvency?

If it is foreseeable that your situation will NOT change again in the short or medium term, write to your creditors and explain your situation. Stop the agreed installment payments with immediate effect and also revoke the direct debit authorization issued for this purpose with immediate effect.

Ask your creditors for an interest-free and cost-free deferral and also ask them to refrain from enforcement measures until you can submit a payment proposal.

Try to find a solution to your financial situation, e.g. by taking up a part-time job.

3. protection against attachment of earned income

If a creditor garnishes your salary, please note the following:

You can use the garnishment table to determine which part of your income will be exempt from garnishment in the event of garnishment or which amount of your adjusted income will be garnished.

Questions and answers on the garnishment table

The share of the attachable income is determined by the number of entitled persons to whom the garnishee owes maintenance.

The adjusted net income is the regular monthly net income less employer's allowances, one-off payments, capital-forming benefits and half of any Christmas bonus, vacation pay and overtime pay.

4 When will the bailiff arrive?

The bailiff is an official of the judiciary. His or her job is to enforce judgments and writs of execution. A bailiff will therefore only come to your home if he has an enforcement order or judgment against you in his hand.

4.1 How does the bailiff obtain an enforcement order?

The bailiff will only receive the enforcement order if you do not meet your payment obligations and court dunning proceedings have been initiated against you.

This happens if you do not settle the claim even after several requests for payment and reminders from the creditor and you, as the debtor, have not been able to reach any other agreement with the creditor.

You will then first be formally served with the so-called default summons. You have 14 days to lodge an objection to the claim. If the claim is legitimate, it is not advisable to object. After the deadline has expired, an enforcement order will be issued against you, which the bailiff can use to enforce the claim against you for 30 years.
 

4.2 How should I behave towards the bailiff?

As a rule, the bailiff announces his arrival in writing. However, he does not have to. Nor do you have to let a bailiff into your apartment or house. You can also ask him to leave your four walls at any time, even if you have already granted him access.

However, it is advisable to cooperate with the bailiff. If you refuse him access to your home twice, he can obtain a court order to search your home. As soon as he has this, he can have the apartment opened by a locksmith at your expense without your consent.

Police accompaniment may also be requested if the bailiff suspects resistance.
 

4.3 What can the bailiff seize and what not?

In principle, the bailiff is interested in recovering the amount owed to the creditor in the simplest possible way. He is therefore primarily interested in cash.

However, the bailiff must take into account the amount he is allowed to seize from you. If the amount seized is sufficient to pay off the entire debt, the bailiff must hand over the invalidated original title to you.

The bailiff may not seize everyday items from you. This includes clothing, furniture, crockery, electrical appliances (e.g. stove or washing machine, but also televisions).

However, if an item is of particularly high value (e.g. a flat-screen TV), the debtor can take it with them if they provide an inferior device in exchange (exchange attachment). The same applies to items that you need for your professional activity (such as a laptop for programmers).

Even your car cannot be seized if you need it to get to work and there is no other adequate option. However, if you own a particularly expensive model, it can be exchanged for a cheaper one as part of an exchange attachment.

In general, however, the bailiff will be interested in valuable items such as jewelry (with the exception of wedding rings) and antiques and in items which, in the event of an auction, will fetch the sum that justifies the expense of the seizure.

4.4 When does the cuckoo come into play?

The bailiff has the option of affixing a lien seal (cuckoo) to your items. From this moment on, you may no longer dispose of the item. You may neither give the item away nor sell it, nor may you remove the pledge seal without criminal consequences.

4.5 Help! The bailiff wants to seize someone else's property!

The bailiff cannot know what belongs to you, what is borrowed and what may not even be paid off yet (leasing, installment payments).

To prevent a garnishment, the real owner must file a so-called third-party complaint with the enforcement court and provide proof of ownership. An attachment will then be lifted.

5 What is a statement of assets?

If the creditor requests a statement of assets in addition to the garnishment order, you must truthfully disclose your financial situation to the bailiff.

Incidentally, the declaration of assets used to be called an affidavit (E.V.) or an oath of disclosure.

Of course it is difficult to submit a statement of assets. Most people with debts are afraid to take this step, especially as the summons to submit a statement of assets also mentions an arrest warrant and prison.

However, this fear is unfounded: Over-indebtedness in itself is not a criminal offense! Your creditors will find out about your current financial situation from your statement of assets. The information you have to provide in writing in the list of assets provides creditors with information about any seizure options.

Your creditors can apply for the disclosure of assets,

If you can provide credible assurance that you will be able to pay the debt within six months when you submit the statement of assets, the bailiff can accept the corresponding installments and waive the statement of assets - if your creditors also agree to this.

6. advice on financial problems, debts or indebtedness

It is best to speak to a well-trained income and budget advisor to find out whether this is really feasible and the right path for you.

The pme Familienservice Group offers free budget advice to employees of its client companies. 

Find out more now: pme Assistance