German insolvency law, as enshrined in the Insolvency Code, does much to support and promote
restructuring. If a business or the owner of a business becomes insolvent, or a business is over-
indebted, insolvency proceedings can be initiated by filing for insolvency; legal persons are
obliged to do so. Insolvency is not a crime but prosecutors must check for certain types of
With a regular insolvency procedure, the insolvent business is generally broken up in order to
release as much money as possible through the sale of individual items or rights or even of parts
of the company. Proceeds can then be paid out to the creditors in the insolvency proceedings.
The distribution of the monies to the creditors follows the detailed instructions of the Insolvency
Equal treatment of creditors is enshrined in the insolvency code. Some creditors have the right to
claim property back. Especially suppliers have secured rights. Post-adjudication preferred
creditors are served out of the insolvency assets during the insolvency procedure. Ordinary
creditors are served on the basis of quotas form the remaining insolvency assets. Secondary
creditors, including shareholder loans, are only served if insolvency assets remain after all others
have been served. Germany ranks 13 in the category resolving insolvency of the World Bank’s
Doing Business Report with a recovery rate of 82.9.
According to the European Insolvency Regulation, known foreign creditors in EU member states
are supposed to be informed individually about deadlines.