When they were able to repay and were thus over-indebted (in percent)?. A Economics and Sociology of Consumer Credit (Publications of the German Society for Public and Private Business eV
Over-indebtedness is used for both individuals and businesses
Because, even if you borrow 2 from a friend for a coffee, your friend is your vendor who has a counterclaim. Debt as such is therefore not necessarily a disadvantage. It only becomes crucial if you are in a position where you have to pay more than the capital available to you every month.
If this problem persists over a long period of time, even if you are trying to cut money and cut costs, you are no longer talking about debt, but about over-indebtedness. Even if you no longer speak of a debt burden. Over-indebtedness is the fact that the income is insufficient to cover the ongoing long-term expenses, so that the liabilities continue to increase, despite austerity efforts.
The term over-indebtedness is used for both individuals and businesses. The fact that they can no longer repay their debts, even though they have reduced their lifestyles, reflects the over-indebtedness of private individuals. The main reason for the over-indebtedness of private life is the financing of life mainly by credit.
Over a longer period of time to the appropriate lender
The TV and the cleaning machine, the sofa bed, the property and the vehicle were purchased through loans that have to be repaid incrementally over a longer period of time to the appropriate lender. As the number of vendors increases over time through installment purchases, the financial situation becomes even more complex.
Many private individuals lose their sight. In addition, various installment payment agreements can be concluded, depending on the loan, so that the customer no longer knows which creditor is entering which installment in which calendar month. In addition, the interest rates for the borrowing are to be added. In a tight financial situation, one-off costs traps such as service charges, back taxes or electricity repayments can overflow the barrel.
The over-indebtedness situation is called from these considerations also as debt spiral. But also for corporations, over-indebtedness means that their equity is not sufficient to cover their debts. Limited partnership (or a company in which there is no unlimited liability) must respond in the case of overindebtedness within the statutory period and declare bankruptcy.
Current consolidated balance sheet
The current consolidated balance sheet is not used to determine over-indebtedness of companies. Rather, according to the BGH decision of 2000, a so-called over-credit balance has to be set up. The aim is to determine whether the long-established company is able to emerge from the over-indebtedness situation in the following years, to pay its expenses and thus to continue to exist.
Over-indebtedness causes a mismatch in your financial circumstances. With the length of the over-indebtedness situation, debt relief becomes all the more difficult. Because interest and other expenses increase the amount owed and often the number of creditors increases over time. The higher the level of debt and the number of lenders, the more extensive the debt relief procedures such as extrajudicial settlement or insolvency proceedings.