Debt counselor explains: how to get out of the debt spiral

Advice from the job coach Ms. K. is hopelessly overindebted – this is the way out the expert recommends

Worrying about one’s own existence is a heavy burden for those affected. Private debts often also have an impact on the workplace: Can I concentrate on my work when I know that I am already in arrears with two loan installments and now I have to pay for electricity as well?? Do I succeed in an important meeting when I am already afraid in the morning of what reminder letter will be in my mailbox in the afternoon? How will my colleagues react if I cancel lunch together (again) or should I rather call in sick that day??

Mrs. K., 41 years, works as a caregiver. The family has two school-age children. Her husband is also a caregiver. The family has two secure incomes. The couple has a joint account from which all running costs are paid monthly. Mrs. K. and her husband have been living with debt for many years. On the one hand, they have taken out loans to support and care for their sick parents. On the other hand, they had to put a lot of money into remodeling their old house, which was in need of renovation. Last but not least, the car went on strike and so the mountain of debt kept piling up.

Since the money to live due to the high monthly installments is no longer enough, both have taken on additional shifts. Shift work is a burden and leaves less time for the children. The spouses are tired. Mrs. K. would like to start an additional training in their profession for quite some time now. Mrs. K. But turns down her employer’s training offers because she knows the family won’t be able to absorb the monthly earnings shortfall. The couple no longer sees a way out of the debt spiral.

Reinhild Furstenberg

How to get out of the debt trap?

Going to debt counseling is difficult for the couple. You still gather all your courage and make an appointment together with one of our debt counselors at the Furstenberg Institute. Mrs. K. is visibly relieved that she can talk about her money worries. She feels – just like her husband – responsible for the debts. They have "juggled" every month and gives up a lot, but they both realize that the years of financial pressure are grueling. You also lack a perspective. Should they struggle with the debts all their lives?

First of all, it is about creating an overview of the monthly income and expenses. Mrs. K. is well prepared and knows every single position. The small budget shows that there are no unnecessary monthly expenses. There are no contracts that could be terminated if necessary. The running costs to maintain the apartment, such as rent, electricity, water, etc., have priority. have always paid the spouses. Mrs. K. is reassured when she hears that this was exactly right. The current costs for the preservation of the dwelling have priority. The family needs its place to live.

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But in how many years can Mrs. K. and her husband could manage to pay back the high loans? It quickly becomes clear that the monthly instalments will continue to be charged essentially on interest and costs for many years to come; repayment of the actual loan amount is becoming a distant prospect. Mrs. K. cries – there is really no perspective? No life without debts? Mrs. K. takes hold and addresses an insolvency application. Our debt advisor takes the idea.

Insolvency proceedings as a way out

What happens in insolvency proceedings? How is an insolvency application filed in the first place? What am I allowed to earn when I’m in bankruptcy? Must I hand over everything to the insolvency administrator? How long do insolvency proceedings take?? How will my friends and colleagues react when they hear about the insolvency proceedings??

My colleague clarifies to Mrs. K. and her husband at length. Knowing what is in store for them reassures her. Since both spouses have signed the loan agreements, Mr. K will also receive. file for insolvency. From this point on, Mrs. K. and her husband forward all the unpleasant mail to the debt counseling service. We will try to find an out-of-court settlement with all creditors. If they do not agree, we will accompany the couple until the insolvency applications are completed.

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Mrs. K. ask: How are we protected in the meantime? Do we have to expect a visit from a bailiff after all? We recommend that the couple close their joint account and set up two separate accounts, each as a garnishment protection account. In addition, the husband and wife receive the current garnishment table for earned income. From this, they can see what amounts they will later have to transfer to the insolvency administrator each month. The maintenance obligations for the two children are considered in the table. This knowledge also reassures Mrs. K. There is enough money left for the family to pay for current living expenses.

Talking about money

Mrs. K. is happy about the amount of information she has received. The prospect that debt relief is possible and that insolvency proceedings will only last three years reassures her and gives her family a perspective. They will manage three years together! At the end of the conversation, there is one more important question: Due to various factors, high debts have accumulated over the years – will this situation perhaps arise again in the future? Mrs. K. and her husband suspect: Yes! Our debt counselor encourages the couple to look at the underlying triggers and, for example, to build up reserves early in the future so that new debts do not arise again after insolvency.

She encourages Mrs. K. also to talk to her manager about her situation and explain why she has not yet been able to begin the additional training. Ms. K. Is confident that her manager will continue to promote her.

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Finally: The phrase "Money is not something you talk about" Is in our heads. But it is important to de-taboo the subject of money at all levels. The earlier you talk about financial problems with people you trust, the more opportunities there are to counteract them with individual measures. The most common causes of debt are unemployment, illness, divorce/separation or an accident. So in most cases it is the things in life that cannot be planned that lead to debt. Nobody has to be ashamed of it. Rather, you take responsibility for your financially unencumbered future when you seek professional help in dealing with debt.

Here are my tips for you:

  • Make sure to ask a reputable debt counseling agency for advice. Unfortunately, there are many providers who offer "fast and unbureaucratic" services Offer help with debt reduction, but still only cost a lot of money and do not accompany you professionally.
  • Don’t be afraid to tackle the issues that often lie behind debt, too. Have you learned good money management skills? Tend to make superfluous purchases in difficult situations? Feel financially responsible for friends or family members so that you always help out? Good money management also has many emotional aspects.
  • Keep track of your income and expenses. Set up a budget to gain an overview. A budgeting app is straightforward.
  • Think also preventively about debts. Often, changes in life situations (such as z.B. Divorce/separation) also affect finances. Consider early on where there may be financial risks and try to minimize them if possible. Find out what benefits you are entitled to now.
  • Don’t bury your head in the sand! There are many ways to help you deal with debt. Accept this help.

*Case study from the consulting practice of the Furstenberg Institute. The case has been anonymized with the consent of the person involved.

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