Creditreform expects more defaults in private households in 2023

Empty piggy banks

Unprecedentedly high energy costs are a burden for private households, some of which have to resort to savings.

(Photo: IMAGO/IlluPics)

Berlin The number of consumer bankruptcies in Germany has fallen significantly in the current year compared to 2021. According to Patrik Ludwig Hantzsch, Head of Creditreform Economic Research, it fell by more than 17 percent to 65,300.

The strong decline is surprising at first glance, after all the economic situation has deteriorated and Russia’s war of aggression against Ukraine has led to unprecedentedly high energy costs, which are also a burden on private households. However, last year many Germans made use of the accelerated discharge of residual debt.

The law, which was introduced by the grand coalition under Chancellor Angela Merkel (CDU), provides for simplified insolvency proceedings. Consumers can get out of debt in three years, up from six years.

As many consumers wanted to take advantage of the beneficial regime, consumer bankruptcies fell by a third in 2020. After the introduction of the new legal regulation, the number of private insolvencies rose by around 87 percent to 78,920 in 2021, and the catch-up effect then ebbed away in 2022.

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According to the federal government’s poverty and wealth report, a private household is overindebted if the income and assets of all household members are not sufficient to pay due claims over a longer period of time despite a reduction in the standard of living.

Consumers have to fall back on their savings

However, Creditreform considers the current decline to be just a snapshot. With the increasing duration of the burdens resulting from the energy crisis and the deteriorating economy, “private consumers are also threatened with more defaults”.

This assumption is supported by a representative survey by the credit agency Schufa, according to which the drastically increased prices for energy and food mean that half of those surveyed have to fall back on savings. Around a third of people believe that their income is not sufficient to maintain their standard of living.

The situation is dramatic for households that no longer have any savings. Only a fifth of households would have enough savings to cover the rising cost of living. Among households with an income of less than 2,000 euros, 40 percent stated that they had no reserves before the crisis.

More corporate bankruptcies

According to Creditreform, the burden on consumers is not yet fully visible. Increases in energy prices would only become noticeable later due to longer-term supply contracts.

While consumers are feeling the calm before the storm, companies are already struggling with the crisis. For the first time since 2009, the number of business insolvencies rose this year.

It increased by four percent to 14,700. Although the increase is moderate, for Hantzsch from Creditreform this is only the prelude to a “further acceleration of the insolvency process”. Nevertheless, one is still a good way away from developments that were observed in 2012. 28,720 corporate insolvencies were registered that year.

More: German companies are arming themselves for the downturn – and are hoarding 765 billion euros

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