Legal explanations, clearly explained for everything to do with insolvency, reorganization and restructuring – compiled by the entire BRRS team from all locations!
Are you involved in insolvency proceedings, have lots of questions and need reliable answers? Your employer is insolvent and you are wondering what this means for you? Are you one of the creditors in insolvency proceedings and don’t know what the final outcome will be and, above all, when?
The BRRS team has compiled the most frequently asked and most important questions and answers for you.
The most common legal terms briefly explained:
This includes the opening of insolvency proceedings (not an expert decision or provisional administration), the rejection of an application to open insolvency proceedings due to a lack of assets or the complete termination of business activities (without filing for insolvency) – Section 165 (1) SGB III.
If insolvency proceedings are dismissed for lack of assets, the debtor’s existing insolvency estate/assets will probably not be sufficient to cover the costs of the proceedings, Section 26 InsO.
The insolvency estate comprises all assets that exist at the time the insolvency proceedings are opened and are collected during the further proceedings. The insolvency estate is administered by the insolvency administrator or trustee.
Insolvency claims are the unpaid claims of a creditor against the debtor existing prior to the opening of insolvency proceedings (Section 38 InsO). In principle, these claims can only be pursued by filing for insolvency.
An insolvency claim (or insolvency liability) is a creditor’s claim that is settled from the insolvency estate before the insolvency claims. As a rule, these are claims that have arisen after the opening of insolvency proceedings (Section 55 InsO). The creditor of a mass liability is referred to as a mass creditor.
Conducting insolvency proceedings costs money. Court fees and the remuneration for the (provisional) insolvency administrator are incurred (Section 54 InsO). The costs of the proceedings are paid from the insolvency estate before the claims of the estate.
Creditors with unpaid claims against the debtor can register their claims in the insolvency schedule (§ 175 InsO). This is a list drawn up by the insolvency administrator of all registered and verified claims of the insolvency creditors.
After deducting the costs of the proceedings and the assets, the insolvency creditors receive an insolvency quota at the end of the proceedings, provided there is money in the insolvency estate. The insolvency quota is a percentage that all insolvency creditors receive in the same amount on their claims established in the insolvency schedule. The insolvency quota results from the ratio of the insolvency estate and the sum of all claims established in the insolvency schedule.
In the case of simple retention of title, the buyer only acquires ownership once the negotiated purchase price has been paid in full.
In the case of extended retention of title, the seller and buyer agree that the new item or the resulting claim shall take the place of the retention of title that expires, for example, due to further processing. The seller’s security interest then continues in the new item or the claim.
In the case of extended retention of title, the buyer acquires ownership not with the fulfillment of the purchase price claim from the specific purchase contract, but only with the fulfillment of further claims.
Separation is regulated in § 47 InsO. A right to segregation entitles the owner to have the item returned to the owner because it is not part of the insolvency estate. Accordingly, such claims are not to be pursued in accordance with the Insolvency Code, but rather in accordance with the general regulations.
Separation is regulated in §§ 49 et seq. InsO. Creditors entitled to separate satisfaction have rights in rem to items belonging to the insolvency estate. They no longer have the power of disposal over the asset, but the insolvency administrator does. Creditors entitled to separate satisfaction are satisfied primarily from the realization proceeds of the items to which they have rights (§§ 165 et seq. InsO).
The most frequently asked questions that we as insolvency administrators and our clerks are asked in preliminary and ongoing insolvency proceedings:
Are you an employee of a company that is going through insolvency proceedings? Here are our answers to the most frequently asked questions from an employee’s perspective:
In the event of the employer’s insolvency, (already outstanding) wages can be paid via insolvency money. Insolvency benefit covers a maximum period of three months’ unpaid wages.
165 para. 1 sentence 1 SGB III: Employees are entitled to insolvency money if they were employed in Germany and still have claims to remuneration for the previous three months of the employment relationship in the event of an insolvency event (see Insolvency event for details).
Yes, just like pensioners and students. In the case of employment on an hourly basis and non-call-off of hours by the employer, an average wage is calculated.
Option 1: after the insolvency event (more details under Insolvency event) and submission of the corresponding application for payment of insolvency money.
Option 2: if the company continues as a going concern, the insolvency money can be pre-financed.
Option 3: Apply for an advance payment after filing for insolvency and if the employment relationship has ended (§ 168 SGB III).
The net salary is insured up to the contribution assessment ceiling (§ 341 Para. 4 SGB III). In addition, all salary components are covered, including disbursed expenses and VWL (capital-forming benefits).
You do not have to – however, the employer will be contacted and informed by the insolvency administrator or trustee so that the employer can calculate the attachable income and transfer the attachable part to the insolvency estate. The employer only has to set up the wage garnishment once and then the process runs automatically.
Are you an entrepreneur and your company is involved in insolvency proceedings? A challenging time awaits you, many questions arise and the situation of having to deal with an insolvency administrator is also new and unfamiliar in most cases. That’s why we answer the key questions from the employer’s perspective in our BRRS Insolvency Wiki.
In insolvency proceedings, creditors as a whole must be satisfied as best as possible and, in particular, equally. Therefore, by law, no one may be placed (paid) in a better position than someone else, which also applies to wage payments. During provisional insolvency administration, dispositions (payments, conclusion of contracts, etc.) are only effective with the consent of the provisional insolvency administrator (section 21 (2) no. 2 2nd alternative InsO). Coordination is required here.
Without the payment of wages, it is almost impossible to keep a business running. As the payment of wages would put employees in a better position than other creditors and is therefore prohibited by law, insolvency money was introduced (for more information, see Insolvency money). Pre-financing of insolvency money is advisable if the business is to be continued. Pre-financing is intended to avoid waiting times for employees, as the Federal Employment Agency regularly only processes insolvency benefit applications after the insolvency event (see Insolvency event). To this end, the respective bank provides the funds as part of the pre-financing before the proceedings are opened and has the insolvency money claims assigned to it by the employees by means of a form. Costs are incurred for pre-financing insolvency money, so this is only possible if sufficient assets are still available to cover the costs.
The prerequisite is an application for approval of the pre-financing of the insolvency money at the Employment Agency, which must be submitted by the pre-financier or the provisional insolvency administrator (§ 170 Para. 4 SGB III).
The application must contain the following information:
- Period of insolvency money pre-financing
- Number of employees at the beginning of the pre-financing period
- Number of employees whose salary claims are to be pre-financed and
- Number of jobs that can probably be maintained in the long term
The approval of the Federal Employment Agency is linked to a positive forecast decision on the preservation of jobs as part of a restructuring attempt. Justification must be provided that a significant number of jobs can be saved through the pre-financing.
As a rule, the management is the main point of contact for the insolvency administration for the entire duration of the insolvency proceedings, as it knows the company best. Good cooperation between the management and the insolvency administration is extremely important for the handling of the insolvency proceedings. The management is obliged to provide full information and cooperation (§ 97 InsO).
The debtor company’s machinery is part of the insolvency estate if it is owned by the debtor company. If the company continues as a going concern, the machines that are needed will continue to be used. Machines that are not required can be sold by the insolvency administrator and the proceeds collected.
In the event of a sale of the company (so-called transferred restructuring), the machines are sold to the purchaser together with the other items attributable to the company.
If operations are discontinued, the machines are utilized or sold by the insolvency administration or a third party. The proceeds from the sale are added to the insolvency estate.
In principle, the managing director is not entitled to compensation payments for fulfilling the debtor company’s obligations to provide information and cooperate, for example for compiling documents, attending meetings and on-site visits, etc.
However, it is possible to agree an individual expense allowance, for example, if it is a matter of cooperation in the continuation of a business or similar. This is determined individually, provided that funds have been collected and are available.
Are you a creditor in insolvency proceedings? We answer the key questions about your claims.
A claim is established if no objection has been raised by the insolvency administrator or by an insolvency creditor or if an objection that has been raised has been removed. The claim is disputed if the insolvency administrator or another creditor was unable to fully verify the justification of the claim. A common reason for this is that the claim has been insufficiently substantiated. Upon request, the creditor will receive a specific answer from the insolvency administrator regarding the reasons for the dispute.
It cannot be predicted at the beginning of insolvency proceedings whether and, if so, to what specific amount an insolvency quota will be paid (for more details, see Insolvency quota). At best, the insolvency administrator will be able to make a forecast at the reporting date. The exact amount of the quota will only be determined at the end of the proceedings. The quota will be paid out after the final meeting has been held, unless there are sufficient assets to make interim distributions beforehand.
A down payment made is a claim for repayment that arose before insolvency proceedings were opened. This is an unsecured insolvency claim within the meaning of § 38 InsO. This can therefore only be asserted by way of the insolvency proceedings with an application to the insolvency table.
There are various forms of retention of title that lead to different results in the context of insolvency proceedings:
Simple retention of title (for more details, see Retention of title, simple):
In insolvency, this entitles the debtor to segregation (more details under segregation) of the item, provided it is still available at the time the provisional insolvency administration order is issued/insolvency proceedings are opened.
Extended retention of title (for more details, see Retention of title, extended):
Here, the seller can reserve ownership of the transferred item to the buyer until the purchase price has been paid in full and additionally grant authorization to resell it in return for assignment of the claim obtained through the sale/processing.
For insolvency proceedings, this means that there is no right to separate satisfaction (more details under Separation) and the creditor cannot directly demand the return of the item in question. However, the seller is entitled to a right to separate satisfaction (see Separation for more details). He receives preferential satisfaction from the realization proceeds of the collateral.
If the proceeds do not cover the amount of the secured claim, the creditor entitled to separate satisfaction is also an insolvency creditor with a claim to the insolvency quota.
Extended retention of title (for more information, see Retention of title, extended):
If the buyer has not yet repaid the purchase price, the seller has a right to segregation of the specific item in insolvency proceedings (for more details, see Segregation). However, if the retention of title is only maintained because it secures other claims of the seller, there is only a right to separate satisfaction in the insolvency proceedings (for more details, see Separation).
The claims must be filed in writing with the insolvency administrator (Section 174 InsO). The documents from which the claim arises must be attached. In addition, the reason for and the amount of the claim must be stated as well as the fact which, in the creditor’s opinion, shows that the claim is based on an intentional tort, an intentional breach of a statutory maintenance obligation or a tax offense committed by the debtor (not possible in the case of legal entities).
The claims must be registered with the administrator by the date specified in the opening order of the competent local court. However, claims can also be filed during the entire insolvency proceedings, but claims filed subsequently will be subject to a court fee.
You are in consumer insolvency proceedings and would like to know what the process is like. Here are our answers to the most frequently asked questions:
As a rule, private insolvency proceedings last three years from the date they are opened. The opening date can be found in the court order, which is served and published. During this time, attachable claims to remuneration from an employment relationship must be assigned to the trustee and fall into the insolvency estate. After the regular expiry of this assignment period, the insolvency court decides on the granting of residual debt discharge.
This is based on the net income according to the current garnishment table, from which the respective amount can be determined. Certain income components (e.g. allowances for work on Sundays and public holidays) may be exempt from garnishment. The granting of maintenance to dependants increases the garnishment allowance.
If you live in rented accommodation and meet your obligations under the tenancy agreement (in particular paying the rent), you can stay in your home. There is no special right of termination due to the consumer insolvency proceedings. Your landlord will be contacted and informed by the insolvency administrator or trustee.
The situation is different if you are the owner yourself. In principle, the house you live in yourself is also part of the insolvency estate. The insolvency estate must be liquidated. You must therefore expect that you will not be able to remain living in the house.