One in ten Germans is currently in debt. This is despite the fact that unemployment in the country is declining and the economic situation is stable. We answer the most important questions about debt and over-indebtedness.
What are debts?
No matter whether you borrow 20 dollars from a friend or order a washing machine on account from the dealer: Whenever you commit to repayment, you are in debt. Even if you “borrow” large amounts from the bank, they are debts. Here they are called credit. It determines exactly how long you will repay it and how much interest you will pay. Basically, borrowing money from third parties is not a problem. On the contrary: This makes sense, especially for larger purchases.
When do we speak of over-indebtedness?
It only becomes problematic when a person is no longer able to pay off their debts using their own income and assets. If liabilities with creditors exceed their own funds over a longer period of time, one speaks of overindebtedness.
Do you have to file for bankruptcy if you are over-indebted?
Don’t worry: Overindebtedness doesn’t always mean bankruptcy. First, try to work with a debt counsel to find an out-of-court settlement with anyone who expects money from you. Consumer insolvency is only a sensible step if this debt settlement procedure fails. If there is insolvency proceedings, you are generally debt free after six years.
Pay off debt with a loan
Let’s say you have $ 3,500 in debt spread across multiple creditors. With the money from a loan, you can pay it off in one fell swoop. But then you stand in chalk at the bank. Plus interest. Although you have gained a better overview, your liabilities have remained or even increased. In the short term, debt restructuring will give you time, but it won’t solve the problem.
You have debts. What can you do?
First, get an overview of all liabilities and sort them by urgency. Then try to make a comparison with your creditors. That means: Offer them to pay the outstanding amount in installments or ask them to waive a partial amount. A debt counselor can do all of this for you. He will also help you with tips on how to get rid of or reduce your debt. Do you have problems with debt?