Limitation of debts
Almost one in ten adults in Germany is considered over-indebted. This is a fact that has become particularly acute in recent years and has led to an increasing number of insolvencies. But what exactly are debts and how can the limitation of debts occur?
What are debts?
Debts in the classic sense arise when a consumer has spent more money than they have earned. If a third party has provided a desired service that the consumer cannot pay for, the consumer owes that person money — they have debt. Debts are thus the counterpart to assets and can grow over time through accruing interest.
What may start as a manageable burden can quickly turn into a debt trap. To escape this, you need to take measures to curb the debt, analyze the liabilities, and tackle them with targeted actions. Only then can you eventually become debt-free again. Many debtors hope for the limitation (statute of limitations) of their debts and that the debts will disappear by law after a certain period. Unfortunately, it is not that simple. Limitation applies only to obligations that have not been formally established in advance, and very few creditors will let that opportunity slip away.
What is the limitation of debts?
When the corks pop at New Year's and the year is welcomed with fanfare, many debtors hope their debts will simply lapse. But it is not as straightforward as it may seem at first glance. Only what has not been legally established can become time-barred. Hardly any company will allow debtors to slip out of their obligations without issuing a dunning order (Mahnbescheid) and an enforcement order (Vollstreckungsbescheid).
As a debtor, you should therefore always assume that the creditor may still stop the limitation of debts shortly before the deadline by obtaining a court order.
Different limitation periods for debts
If a debtor is nevertheless fortunate enough that a creditor does not legally establish the claim, different debts may be subject to different limitation periods. The standard limitation period, formerly 30 years, was reduced to 3 years by a legislative decision in 2002. A relatively short time that should prompt both creditors and debtors to act.
However, the standard limitation period does not apply to all debts. For example, debts to a landlord arising from subsequent ancillary cost claims (Nebenkostennachforderungen) may already become time-barred after 12 months. It should be noted that the limitation period always ends at the end of the calendar year. If the debt originates, for example, in August 2010 and the limitation period is 3 years, that period expires on 31.12.2013. You should therefore never celebrate too early.
Interruption of the limitation period
If you have a meticulous creditor, they can theoretically still have a dunning order served on 31.12. — thereby stopping the limitation of the debt. The previously long period of 30 years may then await the debtor. The limitation period can also be interrupted, for example when the creditor files a lawsuit or when the creditor and debtor reach a payment agreement.
Even if the debtor files for insolvency, the limitation period cannot necessarily be maintained in the same way. If the debtor successfully completes the good conduct period (Wohlverhaltensphase) without negative consequences, they can be debt-free after 6 years, regardless of earlier limitation periods. In such a case, previous time limits become irrelevant.
If the debt is formally established, the limitation period is always extended to 30 years. That means you may have to carry the debt with you for at least 30 years if you cannot settle it by repayment or through insolvency. Worse still: debts also negatively affect your Schufa. This can become problematic in many everyday situations.
What does this mean for the debtor?
As a debtor, you must be aware that debts do not simply "disappear." Almost all creditors will protect their claims by obtaining a court order. Small debts can quickly grow considerably. A dunning order and an enforcement order often bring many fees and interest charges, which can quickly far exceed the original debt.
It is better not to let it come that far and to tackle your debts proactively from the start. The fact is you cannot simply wait them out; they can become an ever-growing problem that affects many aspects of life.
Debt consolidation can help
If you want to prevent the situation from getting out of hand and tackle your debts right from the start, debt consolidation can help. In a debt consolidation, you combine all outstanding debts into a single loan and repay that larger debt in small monthly instalments. This measure brings advantages: you no longer have to deal with many creditors at once.
It is very difficult to service multiple creditors simultaneously with limited funds. By consolidating all debts into one larger loan, you can pay off the individual creditors and then only need to repay the single consolidated loan. This is usually simpler and cheaper. You not only save on various interest charges but can also control the loan term and therefore the instalment amount when consolidating.
If you have relatively little money available, you can keep the instalments small. If you have more funds and want to repay the debt as quickly as possible, that is also possible with a consolidation loan. Depending on what you prefer and what your personal financial situation allows, MAXDA will be happy to help you.