What happens if I don't pay my debts?

Not being able to pay debts usually means stress and worrying about the consequences. There are myths and half-truths about serious consequences that you may not actually have to fear. On this page, we want to clear this up and clarify what happens and when and what the consequences are: 

The creditor will try to get the money
Does my partner also have to pay for my debts?
Can I lose my property because of debt?
Will I go to prison for unpaid debts?
Who will find out that I am in debt?
Will my employer find out about my debts and can I lose my job as a result?
Can I still take out loans or conclude contracts if I have debts?
Can I lose my home because of debt?​​​​​​​

Yes, a creditor will try to get the money they are entitled to. In almost every case of an outstanding invoice or (credit) instalment, the creditor will remind you of the missed payment. You will receive a payment reminder or a reminder and will be asked to make the payment. Creditors then often charge a reminder fee. The amount to be paid therefore increases. If you still do not pay the debt, some creditors commission a debt collection agency or a law firm (see page on reminders and threatening letters).  

If you are still unable to pay the outstanding debt, the creditor, debt collection agency or law firm will sooner or later initiate legal dunning proceedings, which may result in seizure. How quickly legal dunning proceedings are initiated varies and is dependent on the creditor's determination. As a rule, you will receive several payment requests beforehand.  

No. Only the person in whose name the respective contract is concluded is obliged to pay. As long as your partner has not co-signed the credit agreement or purchase contract or is not named in it (e.g. in the case of an online purchase), they are not obliged to pay. Your partner must also not have provided a guarantee for you; otherwise they are obligated to pay. This is just as true in marriage as it is in a partnership. 

If debts are not paid as agreed over a longer period of time, creditors can try to obtain the money by means of compulsory enforcement. Property can then also be seized. But: things that are fundamental to life cannot be taken away from you. And the seizure must bring in more money than it costs. This is why very valuable items in particular are seized. You can find more information on this on our seizure of property page.

The fear of going to prison because of debt is unfounded in most cases. It is true that some debt collection companies or lawyers threaten imprisonment in their letters. As a rule, this is an empty threat.  

To understand when detention could be a possible consequence, you should know: Not all imprisonment is the same. There is the conventional prison sentence. It is imposed for the commission of criminal offences. A substitute custodial sentence, on the other hand, is imposed if a fine is due and not paid. The third and last is enforced detention. Enforced detention is to be understood literally and is used to enforce certain behaviour. As soon as this behaviour is made up for, the arrest warrant expires.  

Only in very specific cases does a threat of imprisonment from creditors lead to a stay in prison. This is because detention can usually be prevented by reacting in good time.  

In the following sections, we describe four options for when imprisonment may be imminent: Fines, penalties, failure to disclose assets and fraud. If none of the following descriptions apply to your situation, you do not need to worry about possible imprisonment. And even in the four cases, a prison sentence can usually be avoided. In any case: take care of your debts before the situation gets any worse. There is always a solution and our on-site debt counselling services team will gladly help you talk to creditors.   

Fines

In the case of a criminal conviction (or a penalty order) that results in a fine, there is a risk of a substitute custodial sentence if payment is not made. Fines should therefore be paid as quickly as possible and before other outstanding claims.  

If you are unable to pay the fine on time, there are two options that can be applied for at the public prosecutor's office to avoid imprisonment: 

• Application for payment by instalments
• Application for conversion to community service  

Our on-site debt counselling services can help you with the applications. 

Important: You may be able to significantly reduce the amount of the fine! This is because the amount of a fine depends on your income. If the actual income is not known to the court, it will be estimated. If the income is incorrectly estimated, you must act immediately and object to the amount (preferably with evidence), as the deadline for a penalty order is quite short at only two weeks from the date of service. If you have committed the offence, you should only lodge a partial objection to the amount of the fine. Otherwise, in the event of a general objection, the entire case will be renegotiated and if your guilt is established, you will be faced with even more costs. 

Penalty Fees

In the worst case scenario, penalty fees can result in enforced detention if they are not paid. Unlike with a fine, however, you can declare your inability to pay in order to avert enforced detention. If you need help in formulating such letters, you can ask our on-site debt counselling services for support. 

Statement of assets not submitted

Anyone who does not pay their debts for a long time will sooner or later have to deal with a judicial officer. The judicial officer will usually send you a letter asking you to provide a statement of assets. They will suggest an appointment for this. You should definitely attend an appointment with the judicial officer! If you are unable to attend the appointment, you should contact the judicial officer and arrange a new appointment. If you do not do this, you may be threatened with enforced detention. As a civil servant, the judicial officer is authorised to obtain an arrest warrant. But don't worry, the judicial officer has no interest in taking you to prison. As described above, this is an enforced detention. The threat of enforced detention only lasts until you have made up the asset declaration. In the best case scenario, however, you can save yourself this stress and submit the asset declaration directly. 

Fraud

Anyone who enters into payment obligations in the clear knowledge that they will not be able to make the payment – i.e. anyone who buys something without intending to pay the sum – is liable to prosecution for fraud. In addition to a fine, a "classic" prison sentence may also be imposed. The important thing is whether you do this on purpose. Did you intend to repay your debts in full, but your current financial situation means you can no longer do so? Then you do not usually have to worry about criminal proceedings. To get an overview of your finances again, you can use our budget plan and debt sorting aid and contact the on-site debt counselling services to get support. 

Who finds out about the debt depends on where your debts are registered. Depending on this, different groups have access to this information. Here is a brief overview of who can see your data and in which cases. Below you will find the detailed explanations. 

Schufa is a credit agency. In addition to Schufa, there are also other credit agencies, e.g. Creditreform or CRIF. Credit agencies assess how reliably bills have been paid or loans repaid in the past. From this, they estimate how reliably someone will pay in the future.  To do this, they store information on almost everyone in Germany. They receive the data from companies. You authorise these companies to pass on your data via the General Terms and Conditions (GTCs) when you buy something from them, for example. The credit agencies are then also informed if a debt is not repaid on time. However, this only happens if your creditor is a contractual partner of the credit agency. If you have debts with a friend who is most likely not a contractual partner of a credit agency, these debts will not appear in any credit agency. If, on the other hand, you have debts with a large mail order company or a bank, you are likely to have a record with a credit agency. 

Credit agencies also store whether a P-account exists or whether a discharge of residual debt has been granted following insolvency proceedings.     

Not everyone can view the information stored by the credit agency. Anyone who wants to find out from a credit agency how solvent they think you are needs your permission. You often grant this permission by accepting the terms and conditions.  

You can also view your own data at the credit agencies once a year free of charge. This is particularly worthwhile if you want to get an overview of your own debt. On the debt sorting aid page, we have collected the links for self-disclosure from the four major credit agencies in Germany. But: The information provided by credit agencies should be treated with caution. Just because no debts are entered in a credit agency does not mean that you are debt-free. 

If it comes to a judicial dunning procedure, there is an entry in the enforcement register. Theoretically, anyone can look here, but there is a charge for accessing the data and it is not normally accessed by people from your own environment, but rather by potential lenders or credit agencies. The data is stored here for up to three years.  

Insolvency announcements are also stored in a public register. Unlike the enforcement register, this data is accessible to everyone free of charge. But here, too, very few people regularly read the insolvency notices.  

A widespread fear is that employers will terminate employment if there are debts. Here we can give a warning. Neither debts nor wage or salary garnishments are grounds for cancellation.  

However, if a creditor seizes your income, your employer will definitely find out about your debt situation. The reaction to this can vary depending on your manager. In small companies in particular, garnishment of wages or salaries can be an additional expense for the employer, which can affect the working atmosphere. In this case, the employer is responsible for ensuring that the correct amount of wages is transferred directly to the creditors. From debt counselling, however, we also know stories of employers who promised their employees support in getting out of debt. 

So you cannot be dismissed because of your debts, but they can have an impact on the working atmosphere. 

In principle, you can also conclude contracts and loans with debts. However, in many cases you will receive rejections if you have payment arrears or a P-account on file with credit agencies. However, this does not happen automatically with every contract. For example, your employer will rarely request a credit report if you want to agree an employer loan with them. In the case of loans, you should ask yourself whether this is urgently necessary in the current situation, especially if you already have payment defaults elsewhere. Sometimes it can make sense to take out a loan to pay off other debts. When weighing up whether such debt consolidation is a sensible option in your situation, the on-site debt counselling services can help you.

Losing your rented home is only a risk if you are in debt to your landlord. There are two cases in which your landlord or landlady has an extraordinary right of termination: 

• As soon as you are in arrears with more than two months' rent
• Two rent payment dates in succession have not been paid in full and the unpaid amount represents a "not insignificant part" of the rent (=one rent payment). 

Example 1:  

Basic rent 450€ 

Hanna can't pay the rent in full in January and only transfers €200, leaving €250 unpaid. In February, she only pays €200 in rent again, leaving €250 unpaid. In two consecutive payment dates, more than the €450 rent arrears have now arisen. The landlord could then give extraordinary notice of termination.  

Example 2: 

Basic rent 450€ 

Peter only pays €150 in February, leaving €300 outstanding. In March he pays the full €450 again, but in April the account is so empty that he again pays €300 too little. In May he manages to pay the rent again, but in June there is even €350 outstanding this time. Peter therefore owed the landlady a total of € 950 in February, March and June. He is therefore in arrears with more than two months' rent and the landlord could therefore also give extraordinary notice of termination. 

As a rule, a condominium is considered an attachable asset. This means that a house or flat can also be seized to pay off debts. If you would like to know more about this, you can find more detailed information in the "Property in debt counselling" guide on the BAG-SB website.