One in ten adults can no longer pay their bills. Ms. K. and her husband have also maneuvered themselves into a seemingly hopeless situation. A debt counselor explains how to get out of it.
By Reinhild Furstenberg
Concerns about their own livelihood are a heavy burden for those affected. Private debts often also have an impact on the workplace: Can I concentrate on my work when I know that I am already in arrears with two loan installments and now have to pay for the electricity as well? Can I succeed in an important meeting if I’m already afraid in the morning of what reminder letter will be in my mailbox in the afternoon? How will my colleagues react if I cancel lunch together (again) or should I call in sick that day?
Ms K., 41 years old, works as a nurse. The family has two school-age children. Her husband is also a caregiver. The family has two secure incomes. The couple has a joint account from which all running costs are paid monthly. Ms. K. and her husband have been living with debt for many years. On the one hand, they took out loans to support and care for their sick parents. On the other hand, they had to put a lot of money into the conversion of their old house, which was in need of renovation. Last but not least, the car went on strike and so the mountain of debt piled up more and more.
Since there is no longer enough money to live on due to the high monthly payments, both have taken on additional shifts. Working in shifts is stressful and leaves less time for the children. The spouses are tired. Ms. K. has been wanting to start additional training in her profession for a long time. However, Ms. K. rejects the training offers from her employer because she knows that the family cannot make up for the monthly loss of earnings. The couple see no way out of the debt spiral.
How to get out of the debt trap?
Going to debt counseling is difficult for the spouses. Nevertheless, you pluck up all your courage and make an appointment together with one of our debt counselors at the Fürstenberg Institute. Ms. K. is visibly relieved that she can talk about her money worries. Like her husband, she feels responsible for the debt. They’ve “juggled” every month and given up a lot, but they both realize that the years of financial pressure are grueling. You also lack perspective. Do you want them to struggle with debt their whole lives?
First of all, it is about creating an overview of the monthly income and expenses. Ms. K. is well prepared and knows every single position. From the small budget it is clear that there are no superfluous monthly expenses. There are no contracts that could be terminated if necessary. The spouses always paid for the ongoing costs of maintaining the apartment, such as rent, electricity, water, etc. Ms. K. is relieved when she hears that that was exactly the right thing to do. The running costs for maintaining the apartment have priority. The family needs their place to live.
But in how many years can Mrs. K. and her husband be able to pay back the large loans? It quickly becomes clear that the monthly installments will essentially be offset against interest and costs for many years to come, and the repayment of the actual loan amount is a long way off. Ms. K. is crying – is there really no perspective? No life without debt? Ms. K. pulls herself together and addresses an application for insolvency. Our debt counselor takes up the idea.
bankruptcy proceedings as a way out
What happens in bankruptcy proceedings? How is an insolvency application filed? What can I earn if I am in bankruptcy? Do I have to give everything to the insolvency administrator? How long does insolvency proceedings take? How will my friends and colleagues react when they find out about the bankruptcy proceedings?
My colleague explains Ms K. and her husband in detail. Knowing what to expect calms her down. Since both spouses have signed the loan agreements, Mr. K. will also file for insolvency. From this point on, Mrs. K. and her husband can forward all the unpleasant mail to the debt counseling service. We will try to find an out-of-court settlement with all creditors. If they do not agree, we will accompany the spouses until the insolvency applications have been filled out.
Ms. K. asks: How are we protected in the meantime? Do we still have to expect a visit from a bailiff? We recommend that the spouses close the joint account and set up two separate accounts, each as a garnishment protection account. In addition, the spouses receive the current garnishment table for earned income. From this they can see what amounts they will later have to transfer to the insolvency administrator each month. The maintenance obligations for the two children are taken into account in the table. This knowledge also reassures Mrs. K. The family has enough money to pay the ongoing living expenses.
They talk about money
Ms K. is happy about the amount of information she has received. The prospect that debt relief is possible and that bankruptcy proceedings will only last three years calms her and gives her family a perspective. They will create together for three years! At the end of the conversation, there is one more important question: Due to various factors, high debts have arisen over the years – will this situation possibly arise again in the future? Ms. K. and her husband suspect: Yes! Our debt counselor encourages the spouses to look at the underlying triggers and, for example, to build up reserves early on in the future so that new debts do not arise again after the insolvency.
She also encourages Ms. K. to talk to her manager about her situation and to explain why she has not been able to start the additional training yet. Ms. K. is certain that her manager will continue to encourage her.
Finally: The sentence “You don’t talk about money” stuck in our heads. But it is important to break the taboo on the subject of money at all levels. The sooner you talk to people you trust about financial problems, the more opportunities there are to counteract them with individual measures. The most common causes of debt are unemployment, illness, divorce/separation or an accident. In most cases, it is the unpredictable things in life that lead to debt. Nobody needs to be ashamed of it. Rather, you take responsibility for your financially unencumbered future when you get professional help dealing with debt.
Here are my tips for you:
- Make sure you ask a reputable debt counseling center for advice. Unfortunately, there are many providers who offer “quick and unbureaucratic” help with debt reduction, but only cost a lot of money and do not provide you with professional support.
- Don’t be afraid to also address the issues that often lie behind debt. Have you learned good money management skills? Do you tend to make superfluous purchases in difficult situations? Do you feel so financially responsible to friends or family members that you always help out? Managing money well also has many emotional aspects.
- Keep track of your income and expenses. Draw up a budget to get an overview. A budget app is straightforward.
- Also, think about debt preventively. Changes in life situations (such as divorce/separation) often have an impact on finances. Think early on where there may be financial risks and try to minimize them as much as possible. Find out what benefits you are entitled to now.
- Don’t bury your head in the sand! There are many ways to help you with debt settlement. Accept this help.
*Case example from the consulting practice of the Fürstenberg Institute. The case was anonymized with the consent of those affected.
Source From: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
