iff over-indebtedness-report 2012 – key findings

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Key findings 2012 in English (pdf)


Less economy and labour market led over-indebtedness in 2011

Figures for the unemployment rate and existence of short-term work schemes provided by the Bundesagentur für Arbeit show an improved job situation throughout 2011 and for the second year in a row. Seasonally adjusted figures show a total of 2.865 million unemployed persons in January 2012, down from the 3.119 million recorded in January 2011. This positive development is also, though to a far smaller extent, once again visible in the employment situation of the new 2011 cohort of over-indebted persons with unemployment referred to as a cause for over-indebtedness by advice-seekers in 46% of the cases in the 4th quarter of 2011, compared to 48% a year earlier. In addition to the fall in cases of over-indebtedness attributable to the labour market situation, Germany has also seen a drop in new initiated consumer insolvency proceedings from the 106,290 recorded in 2010 to 101,069 in 2011.

Ill health establishes itself within the “Top Five” causes of over-indebtedness
From the 2011 findings, five triggers for over-indebtedness stand out: Unemployment is still the most referred cause (31.8%), followed by divorce and separation (12.0%), consumer behaviour (10.8%), sickness (10.2%) and failed self-employment (9.5%). Of these triggers, the fourth, sickness, which represented only 5% of cases in 2005, has now permanently established itself as one of the most important causes of over-indebtedness, i.e. belonging to the “top five” causes..

Further deterioration in the educational and vocational training attainment of the over-indebted
Compared to a year earlier, the average level of vocational training of debt advice-seekers has further declined. Only about 2% of advice-seekers have a higher education or equivalent degree, compared to the 14% for the overall German population. With an increase of 1% since 2010, advice-seekers with no training at all represent 45.9 % of the over-indebted, compared to the 28% with no vocational qualifications in the overall population.

Large estimated number of unreported over-indebted neither captured in debt-advice nor insolvency statistics
On the basis of data available on the duration of the over-indebtedness process, and from the official insolvency statistics and absolute numbers of over-indebted persons, estimates suggest that as many as 4 million people may be in financial distress without ever reaching debt-advice services or insolvency proceedings.

Slight increase in the average outstanding debt of the over-indebted to 27,260 Euro
The average total debt amount owed by over-indebted has risen slightly of late to reach 27,260 Euro per household. The amount of debt outstanding, while positively correlated to income, does not show a similar relationship with any of the other individual indicators such as education, gender or age on their own.

Liabilities towards banks decrease to an average of 12,711 Euro
The average debt of debt advice seekers towards credit institutions has continuously decreased over past years and now constitutes 12,711 Euro of debt, down from 13,468 Euro in 2010 and 17,017 Euro in 2007). Banks aside, governmental institutions are among the most important creditors.

Debts under public law reach a peak level at 4,869 Euro
Average liabilities towards the public sector rose to 4,869 Euro (from 3,666 Euro in 2010). Only about a third of advice-seekers in 2011 had no liabilities towards the public sector whatsoever.

Percentage of single households increasing, single parents remain most vulnerable form of household
Analysis of household formation among the over-indebted shows that single households have registered an increase of about 4 percentage points since 2008. Currently, 55% of new over-indebted persons are living in single households compared to the 40% share they represent of the overall population. While the percentage of single parents has fallen slightly (2011: 15.3%; 2008: 16.3%), concern for this group remains high due to its continued high incidence factor of over 2.6, leaving single parent households those most exposed to the threat of over-indebtedness.

Slight improvement in employment, but with atypical forms of employment widespread
In 2011, more than 18.4% of advice-seekers were white-collar employees and 6.8% blue-collar workers (16.3% and 6.8% respectively in 2010). Despite the slight increase, the share of paid employees among advice-seekers continues to be a lot smaller than the corresponding figure for the overall society. Both groups are underrepresented by a factor of 0.5. In addition, an atypical employment pattern can be inferred based on the observation that around 27% of advice-seekers declaring an earned income also obtained transfer payments related to unemployment benefit ALG 2 at the same time.

Recent small improvements following introduction of the protected account (“P-Konto”)
A positive development concerns the reduced number of unbanked households and the emergence of users of a protected account (“P-Konto”, a new type of account that provides legal protection from wage garnishment by creditors below a set amount of funds to cover the subsistence minimum). In 2011, 16% of advice-seekers did not have an own bank account and only 33% of bank accounts of the remaining over-indebted did not contain the protection from seizure from the account.