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Income, consumption, living conditions

Overindebtedness - more than a marginal social phenomenon

Destatis, 30 June 2014

Every year since 2006, roughly 100,000 individuals have requested consumer insolvency proceedings to be opened because they had become unable to pay their debts. This figure alone illustrates that overindebtedness is a serious problem in our society. In addition, there are those who do not (have to) go to court although they have ended up in a difficult financial situation. There are no reliable data on the exact number of such people. It can however clearly be specified what group of persons is particularly affected by overindebtedness, who their creditors are and what the causes of their financial problems are.

Men living alone are especially often overindebted

Persons consulted, by living arrangementEnlarge picture

The proportions of men (50.8%) and women (49.2%) among the clients of debt advice centres are roughly the same. Nevertheless, overindebted people are not a homogeneous group. For example, singles, lone parents and couples with or without children are not affected to the same extent by overindebtedness. The frequency of couples without children being clients of debt advice centres (15%) is far below average when compared with their proportion in the total population (29%). The staff of such centres are very often contacted by men living alone. While the latter's proportion in the total population is 18%, they account for the highest percentage of those who received advice (28%) when compared with all other groups of people studied. Another group of people found disproportionately often at debt advice centres is lone mothers.

Persons consulted, by ageEnlarge picture

Examining overindebted people by age shows that 25 to 44 year olds are particularly often affected. While this population group accounts for just under a third of the total population, half of the clients of advice centres were in this age group. People aged 65 or over made little use of the services offered by debt advice centres. Although they account for a quarter of the total population, only 6% of the consumers who received advice were at retirement age. The reason for this might be that, generally, older people are rather seldom affected by overindebtedness. But the reason might also be that, for many older people, their inability to pay their debts is a taboo issue and, consequently, they do not talk about it. In addition, for health reasons, many elderly people may no longer be able to go to an advice centre themselves.

Average debt of roughly 33,000 euros

People with financial problems have average debts of roughly 33,000 euros with their creditors. The highest liabilities are by far those that debtors have to credit institutions. The liabilities debtors have to this group of creditors are an average 17,900 euros. There are considerable differences between the sexes as regards claims of public creditors, which include, for instance, the local tax offices. These differences might be due to the fact that men are more often self-employed than women. Men also have much higher debts in terms of maintenance obligations. The average claims of mail order companies are higher for women than for men.

Table: Most frequent group of creditors, by sex, 2013

Liabilities of young debtorsEnlarge picture

For young debtors under 25 years, the average liabilities (roughly 7,450 euros) are much lower than for all debtors. A peculiar fact is that, in this age group, the amount of the claims of credit institutions are roughly the same as that of the debts with telephone and internet providers. On average, these liabilities to credit institutions account for 19% of the total debts owed by under 25 year olds. The proportion of the claims of the telephone and internet providers (18%) is just slightly smaller. When looking at all debtors, their liabilities to banks are a multiple of the claims of the telephone companies.
In roughly 90% of all cases, debtors have not just one creditor. Instead, they have liabilities to several institutions or individuals. More than one in three clients of advice centres have liabilities to ten or more creditors. In such cases, getting a detailed overview of the debt situation of a person with financial problems may be a big challenge for a debt advisor.

Unemployment as a factor triggering overindebtedness becomes less important with age

Main triggers of overindebtnessEnlarge picture

Overindebtedness is not necessarily the consequence of unreasonable consumption behaviour. Examining the main triggers of overindebtedness shows that the payment problems are often caused by a blow of fate. Such risks include especially unemployment, separation, divorce and the partner's death, but also sickness (including addiction) and accidents.

Taking a closer look at individual age groups shows that, depending on age, different main triggers of overindebtedness can be identified. While for young people under 25 years inefficient housekeeping is identified as a frequent cause of financial problems, health problems such as sickness play a larger role among those aged 45 or over. While unemployment is identified as the main trigger of a financial crisis for only about 8% of those aged 65 or over, losing their job is the key reason for overindebtedness for roughly one in four people in any of the other age groups.

The Federal Government, too, takes account of the fact that financial problems are not necessarily due to excessive consumption behaviour. Consequently, on 1 July 2014, the German Bundestag adopted legal provisions helping those concerned to try a financial restart. Subject to specific requirements, it will now be possible for insolvent consumers to reduce the multi-year observation period following the actual insolvency proceedings. After the observation period, during which the debtor has to transfer part of his/her earned income to a trustee, the court decides whether the debtor will be relieved of his/her remaining debts.


Author: Claudia Finke – Federal Statistical Office
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© Statistisches Bundesamt (Destatis), 2018

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