iff over-indebtedness-report 2014 – key findings

Key findings 2014 in English (pdf)

Despite the favourable economic climate overindebtedness fell only slightly in 2013

As a result of the favourable economic climate, increased levels of employment led to a fall in unemployment to 2,916,000 between mid-2013 and June 2014. In the same period, the seasonally adjusted rate of unemployment fell to a new low of 6.7 per cent. Irrespective of this development, the number of long-term unemployed rose in 2013 by just under 19,000 to 1,050,435 compared with 2012 and the proportion of households in insecure employment, based on those in receipt of ALG II despite being in paid employment, remained stubbornly high. This raises the concern that the economic climate did not benefit households with multiple difficulties and that these people are in need of additional support.

Significant drop in consumer insolvency procedures
There has been a consistently positive trend in consumer insolvency procedures. The German Federal Office of Statistics (Statistisches Bundesamt) recorded only 89,207 new procedures in 2013, 6.6 percentage less than in the preceding year. This trend continued up to April 2014. A total of 18,236 insolvency procedures were commenced in relation to self-employed individuals, either in the standard form of insolvency procedure (12,775) or the simplified procedure (5,461). That was only 37 less than in 2012. Between 1999 and April 2014, a total of 1,022,220 consumer insolvency procedures were initiated.

The “Big Six”-causes of almost three-quarters of overindebtedness cases
The “Big Six”-causes of overindebtedness, namely unemployment (29 per cent), business failure (10 per cent), separation and divorce (10 per cent), sickness (8 per cent), irrational consumer behaviour (8 per cent) and income below the poverty threshold (7 per cent) were assessed by money advisers to be the main cause of almost three-quarters of cases of overindebtedness, and can now be seen as the “Big Six”-causes.

Average indebtedness falls in 2013 to 31,431 euros
Average indebtedness fell from 34,727 euros in 2012 to 31,431 euros in 2013, and 50 per cent of overindebted households presenting for debt advice had debts of 14,000 euros or less. Similarly, clients who had previously been self-employed had significantly lower levels of indebtedness in 2013, with an average of 63,525 euros, compared with the previous year (76,120 euros). In terms of the amount owed, more than 80 per cent of claims were attributed to banks, the public sector, commercial creditors and debt collection agencies. Despite the falling re-finance interest rates applied by the European Central Bank, the average level of interest on arrears and legal costs have risen steadily in recent years.

DOverindebtedness in 2013 overwhelmingly a lonely fate
More than half (57 per cent) of those seeking advice in 2013 were living alone – the highest rate since we began conducting this survey. Single-parent households were particularly affected by overindebtedness (16.2 per cent of households – by a factor of 2.5) and couples with three or more minor children (3.2 per cent of households – by a factor of 1.8). The favourable economic climate has not penetrated these population segments. The risk of overindebtedness among households with four or more children is also high at triple the average.

Lowest number of unbanked households
Our research revealed positive results in relation to “seizure protected accounts” and the number of unbanked households. More than half of those seeking advice and almost one-in-ten facing current seizure proceedings already had access to their own seizure protected accounts at the time they presented for advice. Lack of a bank account was at its lowest level since we began to collect this data. In 2013, only 10.5 per cent of those seeking advice no longer had a current account when they first presented for advice. In 2004, this figure stood at 22.1 per cent.

Typical period of overindebtedness is 14 years
Less positive is the typical period of individual overindebtedness, which still stands at over 14 years from the first sign of overindebtedness to the “Fresh Start”. Waiting periods and length of advice periods have fallen. Waiting time (the time between the first contact with the debt advice centre and the start of the advice process) was 6 weeks in 2013. The advice period has also fallen markedly during the past ten years. Last year it was on average only just under four months (in 2004, it was 17.5 months).