On this page, we inform about the working of a debt counselor, the process of a debt restructuring and give recommendations for reputable providers.
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Getting out of debt
The television station RTL has created a quite successful reality series with and on this topic. That debt and over-indebtedness cannot be denied, the following graph shows:
Even if the number declined sharply in 2009, the rising trend cannot be ignored.
Become debt free
First of all, it is important to clarify which types of debt there are. You already have debts, if you overdraw the current account with ten euros. You also have debt when you buy the TV on credit. Both facts are not yet tragic. Experts see a capital service of up to 25 percent of the net household income as justifiable.
Debt occurs when net household income is no longer sufficient to provide debt servicing. However, the debtor still has other assets that he can use to settle the open positions.
Over-indebtedness is mentioned when the debtor has neither sufficient net income nor other assets that could be liquidated. If this situation has occurred, sleepless nights and unopened envelopes are usually the results. Overindebtedness inevitably leads to insolvency without the help of experts. Already in the preliminary phase, the debt, the way to a debt counseling is advised. Many sufferers commit the mistake and march open-minded into over-indebtedness. Lack of money often leads to complete lethargy and a form of self-abandonment. However, this does not have to be the case if a serious debt restructuring is started early.
The debt counselor – coach and negotiator
Debt counselors do not take legal advice but cooperate with specialized lawyers in this case. First of all, the debtor advisor helps the debtor get an overview of the outstanding claims and their general financial situation. This overview is often lost through the ostrich policy.
Debt restructuring process – how does it work and what is it?
The first step in the process of a successful reputational debt restructuring consists of three points:
- First, it requires a statement of all income. In addition to the income from employment include, for example, income from part-time jobs or interest income. Possible pending repayments, be it from the tax office, be it repayment repayments are also recorded.
- In the next step, all expenditures must be listed by means of a budget book. This approach also shows where savings potential exists. The debtor must also consider any additional payments, for example for suppliers or taxes.
- The final work process to get started on the recovery is to list all liabilities. Special attention will be paid to creditors who are already threatened with seizure or debt collection.
Negotiations with the creditors
To avert threatening private insolvency, there are several approaches. The first is that the debtor advisor negotiates with the creditors about changed payment arrangements. This includes, for example, reducing existing installments or agreeing to installments for open one-off receivables.
In this context, some debt advisers offer that the debtor transfers the open monthly claims in one sum to the adviser and distributes the funds to the creditors. This procedure has an advantage. With the often high number of different invoices, no payment is forgotten and the debtor does not succumb to the temptation to delay one or the other payment.
Credit for debt restructuring
Another approach to debt restructuring is to pool all outstanding claims into one loan. Existing loans are being rerouted, and one-time receivables replaced by the loan. However, the option to bundle all outstanding debts and replace them with a loan often harbors a stumbling block. Unpaid invoices and bounced installments on existing loans are reported by the creditors to the Schufa. This makes it difficult to negotiate with a bank for a loan. Also, in this case, debt counselors know how to negotiate with a bank and can usually “sell” the recovery plan better than the debtor involved.
A debt relief, as made possible by Article 397 rty, is probably not accepted by any creditor, because every company wants to “see” their money again.
Care in private bankruptcy
If the approaches, as described in the section above, have no chance of success, the debtor only has the path to private insolvency. Fortunately, the number of private bankruptcies in Germany has been steadily declining for several years.
Even if personal bankruptcy is based on a court ruling, it can turn out to be more or less harsh for the debtor. It is therefore important that the debtor, in this case, is also professionally assisted in order to achieve the best possible solution. The inexperienced in these things usually consumers are the legal departments of the creditors or their lawyers, whose interest is, of course, the largest share of the borrowable income of the debtor.
Select debt counseling – what is important?
Peter Wzarts will only be active in cases that guarantee RTL high ratings. But what about the single mother with 1,500 Euro net income and 10,000 Euro debt? This is on the selection of a debt counselor on its own. As in every industry, there are also black sheep, who want to enrich the need of their fellow human beings. How do you recognize a reputable debt counselor?
Reputable debt counselor
There are certainly companies that have been successful in this profession for many years, sometimes decades, and can demonstrate corresponding successes. Of course, these companies also want to earn money, it only raises the question of how. Reputable debt counselors forego prepayment or arbitrarily invoice during the proceedings. The costs are clearly stated. In addition, they provide on-site support, meaning that they are regionally or nationwide active. Personal counseling is an integral part of the debt reduction strategy. For example, a payment method is that the debtor, as described, transfers his outstanding payments in one sum to the Distributor for redistribution. This amount may then include the fee of the consultant. The payment is therefore not in a sum, but ratierlich.
Debt restructuring online
The Internet allows a debtor to describe his financial situation online in advance. The proposed solutions are then no longer via the Internet, but just personally.
Even if it seems that debt is threatening, the road to a debt counselor should be a must. You can settle/consolidate in one place your payday loans. This gives the debtor a first overview of what is feasible without immediately making another financial commitment. If the over-indebtedness has occurred, the person concerned can not continue without professional help. The path to the pawnshop is already no solution at this time.