Loans and installment payments enable even those consumers to buy consumer goods or motor vehicles who cannot (fully) raise the money from their own resources. You are in debt for a certain period of time, but you can handle larger expenses that you would otherwise have to do without.
However, this debt also carries a risk, z. B. If your income suddenly disappears and you are no longer able to repay your debts. If the mountain of debt grows due to further liabilities, the debtor will sooner or later end up in over-indebtedness. Only very few people can get out of this situation on their own. In most cases, the help of a professional debt counseling service is required.
FAQ: debt counseling
Debt counselors will help you find a solution to settle your debts and get your finances back under control. Reputable counseling centers do not arrange loans or provide other funds. You can read more about the tasks of a debt counseling here.
People whose income is no longer sufficient to pay all debts and liabilities are considered over-indebted. You should definitely see a debt counselor. Do not wait too long!
On the one hand, municipalities offer government debt counseling services. This and the counseling services offered by non-profit agencies are free of charge. On the other hand, there are the commercial service providers, but their debt help is chargeable. Be sure to get a clear explanation of the costs involved and how they are made up. You can read about the signs of a dubious advisor in the following section.
More information on debt counseling:
Tasks and assistance of a debt counseling center
People whose monthly income is not enough to pay all living costs and expenses from it are considered to be over-indebted. Often suffer from existential fears and fear being stigmatized by others as losers.
Even if an overindebtedness strongly loads, makes fear and even paralyzes – it is no reason to remain inactive. Do not resign yourself by not opening bills and reminders anymore. Instead, take help and contact a debt counseling service. It helps you reduce your debts and shows you the way back to a debt-free life.
Among other things, the debt counselor takes on the following tasks:
- Stocktaking: analysis of the financial and personal situation
- Contacting and negotiating with creditors
- Working out a proposed solution for debt reduction
- Advice on the right way to handle money
- If necessary, advice and support for private insolvency
Therefore, contact a debtor counseling service as early as possible. Because in the case of over-indebtedness, every day counts, because the liabilities increase over time. In addition to the actual debts, interest on arrears, reminder fees and, if necessary, collection costs are also incurred. In addition, you may lose the chance to defend yourself against unjustified claims. Therefore, the longer you wait, the more difficult it is to settle debts.
How and where to find a professional and reputable debt counseling service
The most favorable option is, of course, if the debt counseling is free of charge for you. On the one hand, this is the case at the debt counseling centers of the municipalities. On the other hand, u. A. The following non-profit organizations offer free debt counseling:
- German red cross (DRK)
- German parity welfare association
- Workers' welfare association (AWO)
- Deaconry of the protestant church
- Social welfare offices
- Consumer centers
In these debt counseling centers work as a rule specialists with most diverse background knowledge, from lawyers over social workers up to bankers. They are all very familiar with the problem of over-indebtedness and regularly educate themselves in this area.
Depending on the advisory concept of the respective debt counseling, the advisors also provide other assistance, such as on the proper handling of money. Unfortunately, the free advice has a disadvantage: because many debtors take advantage of their offer, there are sometimes very long waiting times. How to use them wisely, you can read here.
In addition to the debt counseling agencies just named, there are also commercial providers whose debt counseling services, however, come at a cost. If you decide in favor of such a service provider, inquire absolutely before with the consumer center federal association whether it concerns a respectable advisor.
Signs of dubious debt counseling are:
- Lurid advertising
- Promise of quick (financial) immediate help
- Service provider only offers debtor counseling by telephone or online
- Provider requires a final installment payment
- Advisor only records the data of the person seeking advice and forwards it to a lawyer – risk of double costs
- Provider urges you to sign the contract, does not give you a cooling-off period
- Debt counseling is combined with further offers/contracts – danger of further liabilities which the debtor cannot fulfill
- Advice turns out to be credit brokering
- Home visits
- Unclear cost structure for advice – reputable providers charge for their services z. B. According to the number of creditors and the debtor's ability to pay
Lawyers also offer debt counseling. They often specialize in insolvency law or foreclosure law. However, their debt advice also costs money and is usually limited to legal advice and representation vis-A-vis creditors.
Debt counseling procedure
Every debt counseling service follows a similar pattern. The reduction of debts does not work overnight, but sometimes takes a lot of time. But if you actively support your debt advisor, you will be able to reduce your debts step by step and start anew debt-free. Consider the whole thing as a kind of project, which proceeds in the following steps.
Most debtors first contact the debt counseling center by phone to arrange an initial counseling appointment.
The actual debt counseling begins with an inventory – the analysis of your income and expenses. This will help you regain an overview of your finances. And sometimes the debt advisor works with you to uncover potential savings.
Sometimes it is not quite clear how high the debts are. Then the advice center requests a statement of claims from the creditor.
Securing your livelihood is also a top priority: if you are threatened with homelessness because of rent debts, the debt counseling service will help you to avert this. It also checks whether you have, if necessary. Statutory social benefits (housing allowance, ALG 1 or 2 etc.) are entitled to.
In the next step, the advisor checks whether the creditors' claims are justified. In the case of immoral or time-barred claims, debt counseling will help you to defend yourself accordingly.
Legitimate debts, on the other hand, must be paid. Here the advisor helps you to negotiate a realistic solution with your creditors for debt reduction.
If the creditors agree with your debt settlement proposal, all you have to do is stick to this agreement and pay back your debt piece by piece.
If the creditors refuse to pay and even initiate enforcement measures, the debt counseling service will check with you whether legal action can be taken against this.
Last but not least, the counselors can also advise you on whether private insolvency is reasonable and possible in your case.
Consulting alone will not solve your problem. Debt counseling can only be successful if you actively participate and adhere to all agreements made. In addition, you should not incur new debts (without consulting your advisor).
Use waiting time wisely – prepare for the first counseling appointment
Be prepared for the fact that you will not immediately receive an appointment with the debt counseling service. However, you can use the waiting period to prepare for the interview as follows:
- List of all income and expenses
- Sort all relevant documents and arrange them according to creditors
- Request current statement of claims from your creditors if you only have outdated records
- Inform creditors of your payment difficulties and also inform them of the reasons with reference to your appointment with the debt counseling service
Important! Do not enter into any new payment obligations or loans during the waiting period. Do not sign payment agreements with a collection agency or a (notarized) acknowledgement of debt.
What you can do to reduce further debts or. To avoid overindebtedness
Debt is not a problem that only people in difficult circumstances have to deal with. Rather, anyone whose income cannot keep up with his or her (excessive) consumerism is at risk or. Who does not have a clear overview of his finances and plan them carefully.