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Debt counseling needs money: consumer advocates fear more personal bankruptcies

Debt counseling needs money
Consumer advocates fear more private bankruptcies

Energy and food costs continue to rise. The burden on consumers could be so great that many fall into the debt trap, there is even a risk of personal bankruptcy. Debt counseling can help to cope, but they say they don’t have the money to do so.

The Federal Ministry of Consumer Protection and debt counseling services fear an increase in over-indebted households in view of the rise in energy and food prices. “We see with concern that the increased prices can also increase the risk of over-indebtedness, especially for low-income households, and that private bankruptcies could also increase,” a ministry spokeswoman told the “Handelsblatt”.

A spokesman for the debt counseling working group said it was to be assumed that high additional payments for electricity and gas in particular threatened “overindebtedness situations”, which could lead to a “considerable increase” in private bankruptcies. The debt counseling working group of the associations includes the federal workers’ welfare association, the German Caritas Association, the German Parity Welfare Association and the Diakonie.

The Federal Working Group on Debt Counseling has been observing a “significant increase” in over-indebted households for a long time. “And we also fear that the increased prices, especially after the pandemic, pose a significant risk of over-indebtedness for many households,” said the association’s managing director, Ines Moers, to the “Handelsblatt”. It is currently difficult to assess whether this will also lead to an increase in personal bankruptcies. “Because if a debt counseling center intervenes early, personal bankruptcy can often be avoided.”

Right to free debt counseling

The debt counseling centers called for better financing of the counseling services for affected consumers. “It is still long overdue that a right to free debt counseling is finally anchored in the Social Security Code,” said Moers. “This is the only way people can seek help nationwide at an early stage and develop sensible regulatory concepts with professional support.”

Anyone who applies for personal bankruptcy can be debt-free after three years and start anew economically. A certain amount is fixed for the three years, which may not be attached, as well as an amount to be paid. After that, the residual debt exemption applies, with which the debts are erased.

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