The Law of Insolvency and Security Interests

Abstract

Section 1 of the German Insolvency Act defines the comprehensive goal of the insolvency procedure as the satisfaction of all the claims of a debtor’s creditors jointly, by either realizing the assets of the debtor and dividing the proceeds or by reaching a divergent arrangement, whereby the business continues to exist. Responsibility for the achievement of the goal is first and foremost the insolvency court and the insolvency administrator appointed by the court. In addition, there is often a Committee of creditors (Glaubigerausschuss) appointed. How and under which legal conditions the mentioned institutions pursue the objectives defined under Section 1 of the Insolvency Act is the subject of this article. Sections II–IV describe the normal insolvency procedure, Section V describes a special insolvency plan procedure (equivalent to composition proceedings), and Section VI outlines the provision concerning the discharge of remaining indebtedness. This provision allows natural persons who have been declared bankrupt to be released from their remaining liabilities, if they agree for a definite time period to assign a substantial part of their future wages or salary to creditors. Section VII contains a brief description of the legal situation in cases where the debtor has property not only in Germany but in other countries as well.