How does debt counselling work?

Every debt situation is individual. Every way out of debt is different, too. In the following, we would like to show you what you can normally expect from debt counselling.

Search for a counselling centre
Contact
Waiting time
Initial counselling session
Securing livelihoods
Budgeting and budget planning
Claim review
Negotiating with creditors
Insolvency counselling
Finalising counselling

You can use the counselling centre search to find the nearest debtor and insolvency counselling centre.

Debt counselling at government and non-profit institutions is usually free of charge. If costs are charged, the counselling centre will inform you of the amount and how the money is used at the beginning of the counselling. 

Commercial debt settlers often advertise a "free initial consultation" and demand a lot of money afterwards. Don't be taken by surprise in your emergency situation and find out everything you need to know before you sign a counselling contract. Rule of thumb: The more confusing a price list is, the more dubious the provider is. 

Make an appointment: You usually call a debt counselling centre in your area yourself and get an appointment for an initial counselling session. Sometimes the social welfare office or Jobcenter can also arrange appointments. 

Note: On the one hand, some counselling centres have requirements that only certain groups of people may receive advice (free of charge) (e.g., only people with a low income). On the other hand, there are counsellors with special expertise (e.g., on real estate debts, debts for the self-employed or health insurance debts). As part of the appointment, a clarification of responsibility therefore usually takes place. 

You may not immediately receive an appointment from a debt counselling centre. You can make good use of the waiting time to prepare for the counselling appointment. Some counselling centres also offer (mostly free) information sessions that you can attend during the waiting time. 

If you have individual questions, online counselling may also be an option for you.

Important: If you have an acute emergency situation, such as when the electricity is to be switched off or there is a risk of losing your flat, you should inform the counselling centre of this when you request an appointment. Then, emergency counselling can also take place during the waiting period. 

The first counselling session is about getting an overview of your specific situation together. During the entire counselling process, the counsellor will discuss with you which tasks you can perform yourself and in which areas you need the professional competence of the counsellor as support. It's about you and your money. That is why the counselling centre will always attach special importance to the fact that you act as independently as possible. If you feel overwhelmed, you can count on the support of the counsellor – you will not be left alone with your questions and problems. 

Other topics of an initial counselling session are often: 

• Application for reimbursement of costs to the social benefit provider
• Data protection agreement
• Possibly signing a power of attorney
• Reference to contact options for the counsellor for urgent questions
• Arrangement of further counselling appointments  

Tip: Bring too many documents to the first counselling session rather than too few. All information about income and expenses, debts and modest amounts can be helpful. We have created an overview of how you can prepare well for the initial counselling session. 

The sooner you take care of it, the better the counselling centre can help you! 

• Securing housing: Even if the landlord has already given notice of termination, there are many ways to prevent the loss of the flat. 
• Avoid power cuts: Paying for electricity and gas is more important than paying off "old" debts. Energy debts endanger your livelihood, because in the end there is a threat of a delivery ban and termination of contract. 
• Prevent imprisonment for failure to pay a fine: If you have been sentenced to a fine by a court for a criminal offence, there is a risk of imprisonment if the matter is not resolved. Debt counselling will inform you about ways to prevent this.  
• Making money available: With the help of the appropriate applications (e.g., to the court or the bank), debt counselling will help you get the money you are entitled to. 

When examining your monthly income, debt counselling will advise you on whether you are entitled to state social benefits. These are, for example, housing benefit, child benefit, maintenance advance, unemployment benefit, basic benefit or social assistance. 

Particularly at the beginning of debt counselling, the counsellor may draw your attention to individual expenses in your budget. You should not take these hints as patronage, but as a way to talk to your counsellor about your financial and personal plans. You yourself know what is important to you. However, the counsellor can help you from an independent and objective point of view in assessing whether you can afford this and other expenses in the long term.

The counselling centre can give you guidance. You decide how you use your financial resources and how you plan your budget: you can keep a detailed budget book in which you enter every single income and expense. Or you can limit yourself to recording your regular monthly income and expenses.
However, it is essential for the success of debt counselling that you have an overview and know your income and expenses. 

Did you know that the amount of debt often changes significantly in the course of debt counselling? After all, an important task of the counsellor is to check whether the interest and costs charged to you are correctly stated. Debt collection agencies in particular often demand more than they are entitled to. In some cases, receivables or portions of receivables are so old that they are time-barred. And sometimes payments were not booked correctly. Depending on the composition of your debts, the sum may therefore be reduced again in the counselling process. 

Claim review also involves looking for creditors you may have forgotten about. And to request current lists of claims if the last letters from your creditors are older. The reverse applies here: depending on the composition of your debts, the sum may therefore increase again in the counselling process. 

During negotiations with the creditors, the counsellor will support you in establishing a balance of interests between all parties involved. The respective steps are always closely coordinated with you. The guideline for your financial resilience is always the individual seizure exemption limits. Payments from the so-called seizure-free amount (below the seizure-free limit) are only offered in absolutely exceptional cases and only at the explicit request of those seeking advice. 

Caution is required if a counsellor wants to know from you what amount of money you can do without on a monthly basis in order to make an unquestioned offer to the creditors with this amount. Serious counselling will check your financial options with you. As a rule, the counsellor will first inform you about the amount of the garnishment to be given to the creditors on a monthly basis and how much you can keep for yourself. Only then is a joint decision made on whether and what amount should be offered to the creditors. 

In a negotiation, for example, the following options can be used: 

• Deferral: This measure makes sense if it is only a temporary insolvency or a short-term financial shortfall. For example, if it is already clear that in a few months you will again have a job with a regular wage or salary and can take payments from it and you are only "short of cash" for a few weeks. A deferral makes no sense if there is no end to the shortfall in sight. 
• Instalment agreements: Payment agreements are possible if there is sufficient income to repay the outstanding receivables, including current interest, within a manageable period.
• Settlements/discounts on receivables: In the case of a settlement, the creditor waives more or less large components of their claim due to the special circumstances in individual cases. The remaining amount is paid either in the form of a one-off payment (e.g., from saved funds, donations from relatives/acquaintances, foundation funds, foundation loans, etc.). Whether and to what extent comparisons are possible depends on many individual factors and cannot be generalised. The age of the claim, the forecast of the debtor's financial future situation, the personal and social situation play a major role here. 
• Waiver/remission/suppression: In very rare individual cases, the creditors waive their claims on the basis of a corresponding financial, personal and social forecast of the debtor. Particularly with authorities and public bodies, claims may be waived or settled in exceptional cases on the basis of corresponding regulations.

This process of negotiation is commonly referred to as out-of-court settlement. 

If an out-of-court settlement fails, you may be eligible for judicial insolvency proceedings. The counsellor will inform you about the proceedings and the respective steps and will support and accompany you through the proceedings.

If you and the counsellor come to the conclusion that the common goals have been achieved, a final discussion will take place. In this interview, outstanding questions will be clarified and responsible contact persons will be appointed for the future. 

If you have given your counsellor (original) documents (e.g., enforcement notices), you will receive them back at the latest during the final meeting. If you have given the counsellor a power of attorney, this will either be revoked or expire. 

The procedure may vary depending on the counselling centre. Find out in advance on the website of your counselling centre about the required documents, opening hours and requirements. 

Continue reading? 

This will prepare you perfectly for the initial consultation.