researching rehabilitation: evidence from germany insolvency and debt management roundtable friday...
TRANSCRIPT
Researching rehabilitation: evidence from Germany
Insolvency and Debt Management RoundtableFriday 26th November, Westminster Room
Michael Knoblochiff institute for financial services, Hamburg
Knobloch Researching rehabilitation: evidence from Germany
Definitions
indebtedness:„A condition of owing money or something of value to another.“
over-indebtedness:„The current or future impossibility to amortise the debts on schedule.“ (German Insolvency Code)
„A household is regarded to be over-indebted when its income, in spite of a reduction of the living standard, is insufficient to discharge all payment obligations over a longer period of time“ (German Federal Ministry for Family Affairs, Senior Citizens, Women and Youth)
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Knobloch Researching rehabilitation: evidence from Germany6
Approximately 100.000 persons passed legal debt-discharge in 2011
Insolvency proceedings, openings
Knobloch Researching rehabilitation: evidence from Germany7
11.8 %
1.0 %
1.3 %
2.1 %
2.9 %
3.5 %
4.5 %
5.4 %
0.2 %
0.4 %
1.8 %
2.8 %
11.4 %
0.2 %
1.2 %
7.0 %
12.9 %
29.6 %
0 % 5 % 10 % 15 % 20 % 25 % 30 % 35 %
Failed self-employmentInadaequate credit and guarantee advice
Birth of a childObligation to pay as an guarantor
Inapproppriate mortgageOther
AddictionLow income earner (poor)
Damage claims due to liabilityIgnoring social benefit entitlements
Criminal behaviourBad management of the household budget
Consumption behaviourAccident
Death of partnerSickness or illness
Divorce or separationUnemployment or forced reduced working hours
Oth
er re
ason
sAv
oida
ble
beha
viou
rU
nexp
ecte
dpr
oble
ms
Triggers of over-indebtedness – as seen by debt advisors
Knobloch Researching rehabilitation: evidence from Germany8
Professional qualification by age(total population and over-indebted persons)
Knobloch Researching rehabilitation: evidence from Germany9
Households affected by poverty(total population and by over indebted persons)
Knobloch Researching rehabilitation: evidence from Germany10
Methodology
Quantitative test
Former clients of debt advice agency in Wilhelmshaven
After legal discharge of debt
Identified by debt advice agency
Written questionnaire
Cash incentive (5 Euro)
400 sent out in June/July 2010 by debt advice agency
78 returned due to wrong address
59 = 18% responded to iff
No following up on non-respondants
Knobloch Researching rehabilitation: evidence from Germany
Reasons for insolvencyas seen by former bankrupts
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Number Percentage
Forced reduced working ours .............................................................................................. 1 2,0 % Earned income not suffi cient.............................................................................................. 3 5,9 % Separation from partner....................................................................................................... 4 7,8 % Unemployment....................................................................................................................... 7 13,7 % Spent too much...................................................................................................................... 7 13,7 % Sickness or i l lness ................................................................................................................ 9 17,6 % Divorce..................................................................................................................................... 11 21,6 % Problems resulting from financial services (e.g. credits) and providers.................. 13 25,5 % Other reasons ......................................................................................................................... 15 29,4 % Fa i led sel f-employment....................................................................................................... 29 56,9 %
Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ estimation of insolvency proceedings
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Knobloch Researching rehabilitation: evidence from Germany
Help requested and received during insolvency
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Number Percentage Number Percentage Debt advice at all times......................................................................... 9 16,7 % 15 27,8 % Debt advice at times.............................................................................. 8 14,8 % 11 20,4 % Education................................................................................................. 2 3,7 % 1 1,9 % Vocational training.................................................................................. 7 13,0 % 3 5,6 % Family councelling................................................................................. 5 9,3 % 0 0,0 % Psychological support........................................................................... 7 13,0 % 3 5,6 % Other services......................................................................................... 9 16,7 % 6 11,1 %
Desired Received
Knobloch Researching rehabilitation: evidence from Germany
Debts after legal debt discharge
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Number Percentage
Clear of debt....................................................................................................................................... 32 64 % Debts incurred before insolvency proceedings........................................................................... 5 10 % Debts incurred during insolvency proceedings........................................................................... 4 8 % Costs of insolvency proceedings.................................................................................................... 13 26 %
Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ situation after discharge of debt
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Knobloch Researching rehabilitation: evidence from Germany
Current accounts of over-indebted households
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Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ financial situation by changes in opportunities in the job market
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Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ financial situation by changes in labour situation
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Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ financial situation by changes in income
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Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ income situation by changes in educational level
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Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ financial situation by changes in educational level
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Knobloch Researching rehabilitation: evidence from Germany
Former bankrupts´ financial situation by changes in health situation
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Knobloch Researching rehabilitation: evidence from Germany23
Conclusions Unemployment and failed self employment are key triggers for over-indebtedness
Fresh start in Germany takes too long
Long waiting period before debt advice
Out of court settlements not successful in the majority of cases
Great impact of credit bureaus
Work is key indicator for post-bankruptcy health
Majority manages to rehabilitate without extra-help
Minority needs extra-help exceeding “pure” debt advice:
Vocational training
Education
Family counseling
Psychological support
Debt advice agencies´ resources are not yet sufficient to cover the demand
More research needed!