Germany is in a debt mess
According to a new study, almost four million households in the republic can no longer meet their financial obligations. As a result of the recession and the associated increase in unemployment, this number could increase significantly in the coming months. Over-indebtedness has been a growing problem in Germany for years.
Over-indebtedness is defined as a situation in which the income of a household is no longer sufficient to cover current installments, full bills and general living expenses. Many people in Germany live financially “on the verge” then enters an unforeseen event, such as the loss of a job, collapses the financial planning quickly and nothing works. Several factors are cited by experts as reasons for the growing scale of the debt problem. On the one hand, the real incomes of many households – that is, the real purchasing power, taking into account the tax burden and inflation – have fallen.
More and more credit is also being bought in Germany.
In addition, young people in particular often can not reasonably handle money. The trigger for financial collapse is unexpected unemployment in almost every third case. Even a sudden change in circumstances can lead to over-indebtedness. The study of charities and consumer centers clearly shows that there is a significant relationship between income and the risk of over-indebtedness.
In 56 percent of cases, the income of over-indebted households was less than 900 usd net per month. The debts are usually made at banks, but also mail order companies and other creditors join the queue of those who try to collect their money with reminders or even by judicial means. But debts are especially expensive for low-income households, because banks here require the highest interest rates because of the obvious higher default risk.
The initiators of the study also see in the ignorance of many people around the correct handling of their private finances a major reason for the over-indebtedness of German households. In many cases, there is nothing left for them to do but to shake off their liabilities by court order through the course of a private bankruptcy – even if it usually takes seven years before the debt is discharged. Around 500,000 people in Germany have already made use of personal bankruptcy. Eighty percent of them, according to the study, are completely destitute and have neither any lucrative income nor assets.
Particularly sad: people who can not meet their financial obligations become significantly more ill than others.
Our tip: to repay in good time. Before it is too late and negative credit bureau entries prevent a meaningful rescheduling.