Privatinsolvenz (Personal Insolvency) in Germany: The Three Year Path to Restschuldbefreiung

Privatinsolvenz, formally the Verbraucherinsolvenzverfahren, is the German legal procedure that lets an individual with debts they cannot pay work toward Restschuldbefreiung: a court order releasing them from whatever remains owed once the procedure runs its course. It is not a shortcut and it is not automatic. It follows a fixed sequence set out in the Insolvenzordnung (InsO), and understanding that sequence, rather than the headline promise of a fresh start, is what actually helps a reader deciding whether to start it.

This page works through the mandatory attempt to settle with creditors before any court is involved, what happens once the insolvency petition itself is filed, the three year period a debtor spends assigning income to a trustee, the narrow grounds on which a court can refuse discharge at the end, and which debts survive discharge regardless of how the rest of the procedure goes.

Information last verified on 20 July 2026. This page provides general legal information and does not constitute legal advice in an individual case.

What Privatinsolvenz actually is

German insolvency law gives an individual who cannot pay their debts a route to Restschuldbefreiung, discharge of whatever debt remains once the procedure concludes. For a private individual who is not running a business, or who ran one but has straightforward, manageable affairs, that route is the Verbraucherinsolvenzverfahren, commonly called Privatinsolvenz in everyday speech even though that exact phrase does not appear in the statute.

The procedure has three phases in practice: an out of court attempt to reach a payment arrangement with creditors, a court phase in which any remaining assets are realised and creditors are paid from them, and then a multi year period in which the debtor's future income above a protected minimum is assigned to a trustee for distribution. Discharge is decided only at the end of that last phase, and only if the debtor has kept to a set of statutory duties along the way.

Step one: the mandatory out of court settlement attempt

A consumer cannot go straight to the insolvency court. § 305 Abs. 1 Nr. 1 InsO requires the petition to be accompanied by a certificate showing that, within the six months before filing, the debtor tried and failed to reach an out of court settlement with creditors based on a repayment plan. The certificate has to come from a suitable person or body, based on a personal consultation and a genuine review of the debtor's income and assets, not a form filled in alone. In practice this means a recognised debt counselling service (Schuldnerberatungsstelle) or another qualified person such as a lawyer or tax adviser, since the Länder set out who qualifies. The petition must also attach the plan itself and explain why it failed.

This stage exists to filter out cases where a private arrangement was realistically available and simply was not tried. It also gives many debtors their actual outcome: some out of court plans succeed, and the debtor never files a court petition at all.

Worked example

A debtor owing roughly 18,000 euro across four creditors approaches a recognised debt counselling service. Over three months of correspondence, two creditors accept a reduced instalment plan but the two largest refuse any reduction. The counselling service issues a certificate confirming the attempt and its failure, dated within the required six month window, and the debtor's insolvency petition can then proceed with that certificate attached.

Opening the case and the three year Abtretungsfrist

Once the out of court certificate is in hand, the debtor files the insolvency petition together with the application for discharge, ideally at the same time. § 287 InsO requires the application for discharge to include a declaration assigning the debtor's attachable employment income to a court appointed trustee for a period of three years counted from the opening of the insolvency proceeding. Any private agreement that tries to override this assignment is void to that extent.

Three years is the standard period. Where a debtor previously went through discharge after 30 September 2020 and is filing again, the assignment period for that later procedure extends to five years instead, and the insolvency court's admissibility check under § 287a InsO also bars a fresh application within set windows after an earlier discharge or refusal.

The three year figure itself was a 2020 reform, shortening what had been a six year period under the previous law. It is worth being direct about its status: the shortened period was in the government's original draft with a temporary sunset built in, and that sunset was removed before the law passed. A Bundestag evaluation report delivered in 2024 examined exactly this question and confirmed the three year period as settled, ongoing law with application numbers showing no unusual surge, and no pending change was identified. A reader should not treat three years as a temporary window that might revert, nor as something recently renewed. It is simply current law.

What the debtor has to do during those three years

Discharge at the end of the assignment period is not unconditional. § 295 InsO sets out active duties the debtor owes during it: taking on reasonable paid work, or actively looking for it if currently without a job, and not turning down a reasonable position without good cause. Half the value of any inheritance received during the period, and the full value of lottery or comparable game winnings above a minor threshold, has to be handed to the trustee rather than kept. The debtor also has to report a change of address or employer to the insolvency court and the trustee without being asked, and cannot conceal assigned income or assets, or take on new debt of a kind the law treats as an attempt to defeat creditors.

These are not merely aspirational. A serious, culpable breach of these duties, causing real harm to what creditors would otherwise recover, is itself one of the grounds on which discharge can later be refused on a creditor's motion.

When a court can refuse discharge

Discharge is the expected outcome for a debtor who follows the procedure, but it is not automatic in every case. § 290 InsO lists specific grounds on which a court can refuse it, and every one of them requires a creditor to actually raise it. The main grounds are: a final criminal conviction, within five years before or after the insolvency petition, for a bankruptcy related offence under §§ 283 bis 283c StGB with a sentence above 90 daily fine units or three months' imprisonment; intentionally or through gross negligence making false or incomplete written statements about financial circumstances to obtain credit, public benefits, or to avoid payments owed to a public body, within three years before or after the petition; intentionally or through gross negligence damaging what creditors could recover, for example by running up excessive liabilities or wasting assets or unreasonably delaying the opening of the case; violating disclosure or cooperation duties under the InsO; giving false or incomplete information in the asset and creditor lists required for the petition itself; and a serious breach of the § 295 InsO employment duty during the assignment period that materially harmed creditor recovery, unless the debtor was genuinely not at fault.

A court does not go looking for these grounds on its own initiative. A creditor has to file the objection, and the court then examines whether the ground is actually made out. A debtor who has been straightforward about their situation throughout, and who has met the § 295 InsO duties, is in the ordinary case rather than the exception.

Which debts survive discharge regardless

Even a full, uncontested discharge does not clear everything. § 302 InsO lists categories of claim that discharge simply does not touch: liabilities arising from an intentionally committed unlawful act (an intentional tort), maintenance obligations the debtor intentionally withheld, and certain tax liabilities where the debtor was convicted of a tax offence under §§ 370, 373 oder 374 AO; monetary fines and equivalent obligations imposed as a criminal or administrative penalty; and any interest free loan the debtor received specifically to cover the costs of the insolvency proceeding itself.

The intentional tort category has a practical wrinkle worth flagging. For a claim to be treated during the insolvency proceeding as one arising from an intentional tort, and so preserved through discharge, § 174 InsO requires the creditor to say so explicitly when registering the claim, stating the facts that support that characterisation. A creditor who registers the same claim as an ordinary debt, without flagging the intentional tort basis at that stage, has registered an ordinary claim that discharge does affect. This is a detail that surprises people on both sides: a debtor assuming a claim is definitely gone, and a creditor assuming a claim is definitely protected, can both be wrong if the registration itself was not done correctly.

Outstanding child or spousal maintenance that was simply unpaid, without the intentional withholding element, does not automatically fall into this protected category, and neither does an ordinary contractual debt, however large. The protected list is narrow and specific, not a general exception for debts a creditor feels strongly about.

What happens to your SCHUFA record

An insolvency and the eventual discharge are recorded, and that record affects a person's credit file for a period after the case closes, separate from the legal question of what is still owed. How long that entry stays visible, and what shortens it, is its own set of rules with its own conditions. See SCHUFA deletion for how that works and what a person can do about it.

For how a creditor's collection letters work before any of this starts, see debt collection in Germany. If a court order has already been issued against you, see the Mahnbescheid and Vollstreckungsbescheid process. General background on German civil law is at German law explained.