Impending Bankruptcy

Impending bankruptcy can affect both private individuals and entrepreneurs. Sometimes insolvency leads to over-indebtedness, where sometimes you may need portfolio recovery lawsuit. Here it is important to get help at a good time. An experienced debt counselor can set the course in the right direction. More than 6,800 firms filed for Chapter 11 bankruptcy protection last year, and the number is likely certain to rise this year. The avalanche of applications arising from the worst economic downturn since the great depression, according to bankruptcy experts, may overload the system, making it more difficult to save the businesses that can be saved.

In order to keep their doors open, most medium-sized firms who file for bankruptcy try to reorganize themselves, working out payment schedules for their debts. They can, however, be liquidated instead if a plan cannot be devised – or if it fails. To pay off debts, the corporation is liquidated, and its assets and equipment are auctioned off.

A group of academics warned Congress in May that unless something changed, “a considerable fraction of viable small companies will be forced to liquidate, suffering high and lasting economic losses.” “Workers will lose employment even in otherwise thriving businesses.”

In this article, you can find out what impending insolvency is, how it is determined, what the threat of consequences is, how you can best act in such a case and how we can help you as debt counselor in the best possible way.

Impending bankruptcy: definition

In § 18 paras. 2, it defined what is meant by impending insolvency. Accordingly, it always exists when a debtor – whether private or business – “will probably not be able to meet the existing payment obligations when they become due”.

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Insolvency can therefore always be assumed when a debtor has stopped all payments.

Signs of impending bankruptcy

Regardless of your present financial condition, knowing the signs that indicate the possibility of bankruptcy is crucial. Even if you haven’t missed any debt payments yet, if you aren’t ready to do what it takes to avoid bankruptcy, things can quickly spiral out of hand.

Here are several red flags that you’re about to step into it:

  • You’re behind on your payments.
  • Your everyday routine is jeopardized.
  • You’ve used up all of your credit cards.
  • Debt collectors are chasing you down.
  • You’ve exhausted all other possibilities.
  • You’re in danger of losing your home.

Bankruptcy or insolvency: what to do?

Bankruptcy has different effects depending on whether the debtor is a private person or an entrepreneur. For a private individual, a debt counselor can help determine existing liabilities and, if necessary, initiate personal bankruptcy. It becomes more complex when a company is threatened with bankruptcy. Filing for insolvency is difficult here and can become an enormous liability trap.

If it is a company, only the management has the right to file for bankruptcy, the creditor does not have this right. However, there is no obligation to do so, so the management does not have to file for bankruptcy. Nevertheless, it is always advisable to do it alone, so as not to be guilty of delaying bankruptcy.

With the introduction of the so-called voluntary insolvency reason (impending insolvency), the legislature created an incentive to motivate companies to initiate insolvency proceedings as quickly as possible.

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This significantly increases the chances of a renovation. Nevertheless, an expert in this field should be taken on board from the outset in order to minimize the liability risks as well as possible.

3. Restricted entitlement to apply in the event of impending bankruptcy

The § 15 regulates the application for insolvency law for companies without legal personality and legal persons. All members of a representative body are entitled to apply. According to Section 15, Paragraph 1, Clause 1, every personally liable partner or liquidator has the right to apply for insolvency in the case of limited partnerships based on shares or in companies without legal personality.

However, restricts this right in the event of impending insolvency, so that only the member of the representative body who is also authorized to represent if the application is not made jointly is entitled to do so. For this reason, requests that have not been coordinated should be avoided as much as possible.

It also becomes complex because company law can also intervene in an application. The shareholders have a right to ensure that their company does not submit such an application too early. If this happens and the management does not submit the application properly, it is personally liable for any problems that may arise.

The cause here is § 43 / § 93. Basically, the bankruptcy application must be for the good of the company. It must not be made for irrelevant considerations.

4. How is the impending bankruptcy determined?

This is a forecast that is determined by drawing up a financial plan. In this, the forecasted deposits and the expected payouts for a predetermined period of time are compared to each other. If the forecast makes the occurrence of bankruptcy more than 50% likely, there is impending insolvency.

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It is not uncommon for there to be over-indebtedness at the same time or there is an overlap. There are two reasons for bankruptcy. In this case, the management’s right to file for bankruptcy becomes an obligation. Over-indebtedness always occurs when the debtor’s liabilities can no longer be covered from his assets (Section 19).

Exception: the continuation of the company is still largely probable. Over-indebtedness is ruled out under insolvency law if the continuation prognosis is positive. This can also be determined with the financial plan.


If you as a private person are threatened with insolvency or over-indebtedness, you should contact a debt counselor at an early stage. This can determine your liabilities, negotiate with the creditors and, if necessary, file an application for personal bankruptcy.If your case is impending insolvency and/or over-indebtedness of a company, it is particularly important to consult an expert in order to avoid negative consequences.

You should seek debt counseling as soon as the first signs appear. In most cases, there is still a lot that can be done to keep the company going. A corporate bankruptcy is extremely complex and should not be pursued alone.


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