Insolvency Law
Until recently, economic development in Germany had been sluggish for several years – thus leading to a great number of insolvencies, particularly of small-cap and mid-cap companies. Moreover, many private persons faced over-indebtness, as well. The relevance of insolvency law increased, respectively.German insolvency law aims at satisfying creditors evenly (based on their ratio of receivables), avoiding fraudulent bankcruptcy, and – as far as possible – enabling the company / the person to continue carrying on business, being relieved from debts.
Most of the relevant provisions are codified in the “Insolvency Code” (InsO). This act became effective in 1999. It reformed German insolvency law fundamentally by emphasizing the legislative intention to – if ever appropriate – restructure deeply indebted corporations instead of vending the assets and shutting them down. Creditors are treated equally, since the former “first come first serve” doctrine was somewhat relativized and creditors may now file their claims with the responsible court.
Furthermore, indebted private persons have been privileged ever since: They may declare their “private insolvency” and disclose their remaining assets, amortize their debts for seven consecutive years under court supervision, and finally be relieved from the rest of their debts.
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