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What is Verbraucherinsolvenz (consumer insolvency)?
Verbraucherinsolvenz is what is commonly referred to as personal or consumer insolvency. It is designed for private individuals who do not run an active self-employed or business activity – such as employees, pensioners, or homemakers.
Basic conditions
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No debts arising from an ongoing self-employed or business activity.
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No large number of commercial creditors or highly complex contractual structures.
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It is also suitable for people who have completely ceased their self-employment and fully closed their business before filing the application.
What is Regelinsolvenz (regular / business insolvency)?
Regelinsolvenz is the standard / business insolvency procedure. It typically applies to:
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Companies and legal entities,
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Self-employed persons (Freiberufler, Gewerbetreibende) who are still active at the time the proceedings are opened,
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Individuals with complex business-related debts or significant business assets.
What if the person has already stopped working on a self-employed basis?
If someone has permanently closed their self-employed or business activity and no longer holds business assets or ongoing commercial obligations, they may be able to apply for consumer insolvency (Verbraucherinsolvenz), provided that:
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There are no continuing contracts linked to the former business (e.g. commercial lease agreements, supply contracts).
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There is not a very large number of commercial creditors (a rough guide often mentioned in practice is usually fewer than about 20).
Key differences between the two procedures
| Criterion | Verbraucherinsolvenz (consumer insolvency) | Regelinsolvenz (regular / business insolvency) |
|---|---|---|
| Target group | Private individuals; former self-employed who have closed their business | Companies; currently self-employed persons; traders |
| Initial steps | Mandatory out-of-court settlement attempt (außergerichtlicher Einigungsversuch) | No mandatory prior out-of-court settlement |
| Administrative complexity | Relatively simple, less documentation | More complex, requires detailed management of assets and business |
| Asset management | Insolvency administrator manages mainly personal assets | Covers business and private assets together |
| Duration of the procedure | Usually about 3 years until discharge of remaining debts | Similar, but can vary depending on asset structure and complexity |
When should a (former) self-employed person choose Verbraucherinsolvenz?
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When the business or freelance activity has been completely terminated before filing.
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When the debts are primarily personal or consumer debts (e.g. personal loans, overdrafts, credit cards).
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When there are no employees and no significant tax or social-security debts related to the business.
When is Regelinsolvenz mandatory?
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When the self-employed or business activity is still ongoing at the time of filing.
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When employees are still employed or continuing business liabilities exist.
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When there are long-term commercial contracts, such as business leases or supply and framework agreements.
Important tips before making a decision
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Seek advice from a lawyer specialising in insolvency law or from a debt counselling centre (Schuldnerberatung).
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Accurately assess your debts and clearly distinguish between business and private liabilities.
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Prepare all documents relating to income, contracts, assets, and debts in detail.
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Consider carefully whether a full closure of your business is possible and reasonable, as this may make it easier to proceed under consumer insolvency instead of regular insolvency.
Conclusion
Choosing between Verbraucherinsolvenz (consumer insolvency) and Regelinsolvenz (regular/business insolvency) is a crucial decision for anyone who is or was self-employed in Germany. The right path depends on whether the business is still active, the nature and structure of the debts, and the number and type of creditors. A clear understanding of these aspects, combined with early professional advice, helps avoid legal complications and opens the door to a new financial start with the lowest possible burden.
The website’s editorial team strives to provide accurate information based on thorough research and multiple sources. However, errors may occur or information may be incomplete or outdated. Therefore, please regard the information in this article as an initial guide only and always consult the competent authorities and professional advisers for binding and up-to-date information.
