In Germany decline in personal insolvencies due to baseline effect - trend reversal in third quarter of 2022 / increase forecast for 2023

Personal insolvencies fell in Germany in the first nine months of the year. In total, there were 71,107 personal insolvencies in the first three quarters of 2022. This represents a decrease of 13.5% compared with the same period last year (Q1-Q3 2021: 82,213). These are the key findings from the most recent CRIF "Debt Barometer Q1 to Q3 2022".

The sharp rise in insolvencies last year (up 93.6% year-on-year) has now reversed to some extent. The increase in personal insolvencies in 2021 was mainly due to the fact that many individuals held back on filing for bankruptcy in 2020. Those involved wanted to benefit from the legislative reform to further shorten the residual debt discharge procedure and take advantage of the announced reduction in the duration of the procedure from six to three years and consequently did not file until 2021. The law came into force at the beginning of 2021 and those affected can now be debt-free after just three years instead of six. This is intended to make it easier for debtors to get back on their feet more quickly. This special measure caused personal insolvencies to rise particularly sharply in 2021. Consequently, the baseline value (Q1 to Q3 2021) is also high and the corresponding percentage change in the first nine months of 2022 is distorted at -13.5%. Despite the high baseline value, there was already a trend reversal in Q3 2022. Looking only at the Q3 figures, personal insolvencies rose by 0.7% to 25,047 cases (Q3 2021: 24,884).

A comparison with the first three quarters of 2019 - i.e., before the legislative reform and before coronavirus - shows current high levels of insolvencies. According to the report, personal insolvencies increased by 11.8% in the first nine months of 2022 (Q1-3 2019: 63,612).

The war in Ukraine and supply chain and inflation problems are having a significant negative impact on the German economy. This also affects individuals. In particular, the sharp rise in energy prices, but also other commodity and food prices, have led to an inflationary increase in consumer prices. The financial situation of many people in Germany remains strained due to steadily rising rent and energy prices. German consumers will have less money in their pockets to meet their obligations such as loan payments, rent or finance. In the long run, lower incomes lead first to over-borrowing and then possibly to insolvency.

"Rising costs mean that a wave of debt is possible in Germany. If costs rise sharply, it will be difficult for those who are already living on the breadline. For financially weak and low-income households in particular, the financial situation will come to a head – this is also because financial reserves have been depleted by losses during the coronavirus pandemic. Economic crises have a delayed impact on consumers. Since insolvency statistics primarily reflect the past, i.e., they are a look in the rear-view mirror, the consequences due to increased costs will have an impact on insolvency figures, especially from 2023 onwards. Even though we are already seeing a trend reversal from the third quarter onwards," commented CRIF Germany Managing Director Dr. Frank Schlein on the current situation. CRIF, an information service provider, expects 100,000 personal insolvencies in Germany in 2022. In 2023, a further increase to as many as 120,000 cases is possible.

People who file for personal insolvency do not necessarily have to be heavily in debt. A large proportion of those affected have total debts of just under €10,000. The average debt is currently less than €19,000.

Personal insolvencies by federal state: most personal insolvencies in Bremen, Lower Saxony and Hamburg

Nationwide, there were 85 personal insolvencies per 100,000 inhabitants in the first nine months of the year. The northern states were more affected by personal insolvencies than the south of Germany. Bremen, for example, leads the statistics with 153 personal insolvencies per 100,000 inhabitants. It is followed by Lower Saxony with 120 and Hamburg with 118 insolvencies per 100,000 inhabitants. The states of Schleswig-Holstein (110), Mecklenburg-Western Pomerania (101) and Saxony-Anhalt (100) are also well above the national average. The lowest numbers of personal insolvencies were recorded in Bavaria (52 cases per 100,000 inhabitants), Baden-Württemberg (64) and Thuringia (67). In absolute terms, the states of North Rhine-Westphalia (16,577), Lower Saxony (9,637) and Baden-Württemberg (7,141) lead the insolvency statistics.

Percentage changes: rise in personal insolvencies in Hesse and Saxony

Personal insolvencies in Germany fell by 13.5% nationwide in the first nine months of the year. In Hesse, personal insolvencies rose by 4.8% year-on-year (Q1-Q3 2021); in Saxony, by 4.5%. There were significant decreases in the first nine months in North Rhine-Westphalia (down 21.2%), Mecklenburg-Western Pomerania (down 20.6%) and Bavaria (down 20.5%).

The picture changes when the current figures are compared with the first nine months of 2019 - i.e., before the legislative reform and before coronavirus. In this comparison, personal insolvencies in Hesse increased by 32.3%. But Saxony (up 28.7%), Bremen (up 26.7%) and Bavaria (up 23.1%) also saw significantly more personal insolvencies in the first three quarters than in the same period of 2019.

Personal insolvencies by gender: more men affected by personal insolvency

The trend seen in recent years of men being more likely to be affected by personal insolvency than women in Germany has continued in 2022. 60.9% or 43,332 of personal insolvencies were filed by men. Men also come out higher in a relative comparison of the sexes. For every 100,000 men, 104 personal insolvencies were filed. This compares with 78 personal bankruptcies per 100,000 women.