FAQ – Insolvency

Insolvency occurs when one of the following reasons for insolvency applies: Your employer/company

• can no longer pay your wages and those of your colleagues
• no longer meet the payment obligations due (e.g. wages),
• is at risk of insolvency,
• has run up debts

If your employer files for insolvency, they will also let you know. In most cases, the provisional insolvency administrator will come to the company and inform everyone about the insolvency application. If your employer does not pay your wages, does not pay them on time or does not pay them in full, this is an indication of possible insolvency. You must claim your missing wages in writing (e-mail) from your employer. 

If your employer has not paid two months' wages, you can request payment in writing with a deadline and announce that you will no longer come to work if you do not get paid.

If your employer has not paid you three months' wages even though you have already given them a warning, you can resign without notice and immediately register as unemployed with the employment agency. This is a reason for extraordinary termination. But you should definitely seek advice from your Fair Integration advice centre beforehand!

All claims that you had before insolvency proceedings were opened are known as insolvency claims.

All claims that you have after insolvency proceedings were opened are called claims against the estate.

If the insolvency application is not opened due to a lack of assets (= no sufficient residual assets), your existing wage claims against your employer will be lost. You can no longer demand money from your employer. You can apply for insolvency benefits from the employment agency and receive your wages for the last 3 months as a one-off payment.

Insolvency claims are not initially paid, but you must register them with the insolvency administrator in the so-called insolvency table. The insolvency administrator will explain what you need to do. The money that is left after the end of the insolvency proceedings is shared out among each person with a claim. This includes you, for example, if your employer owes you wages. In most cases, however, there is little left to distribute.

The insolvency administrator must pay you the full amount of your claims against the estate. This also includes your claims to wages that arose after the insolvency event. The insolvency administrator becomes the employer with the decision to open insolvency proceedings. You must notify the insolvency administrator of your claims from this point onwards. The insolvency administrator will inform you how and until when you can register your claims. The deadline should be at least two weeks and a maximum of three months.

Insolvency, in itself, is not a reason for dismissal. In principle, the rights and obligations arising from the employment relationship continue to apply even after the opening of insolvency proceedings. The general and special protection against dismissal remain in place for you. However, the termination or dismissal notice periods are shortened to a maximum of 3 months.

The insolvency administrator has all the rights of the employer in insolvency proceedings and can therefore also dismiss you.

You must receive the dismissal in writing. If you are dismissed verbally, you must continue to offer your services – preferably in front of witnesses. Then you are still entitled to your wages. Only a written termination or dismissal is legally valid! If you receive a written notice of dismissal, you can only file an action for unfair dismissal with the labour court within three weeks.

If you want to resign yourself, you must give your resignation to the insolvency administrator in writing. You also have a maximum notice period of three months to the end of the month. You should seek advice from an advice centre before resigning! 

You can apply for insolvency benefits from the employment agency as compensation for lost wages. 

Please note: there are claims that cannot be taken into account for insolvency benefits.

You can register these as insolvency claims by entering them in the insolvency table with the insolvency administrator if they arose before the insolvency proceedings were opened. You will receive forms in which you can enter your outstanding wage claims from the period before the insolvency proceedings were opened. You should also register all other claims that are not covered by the insolvency benefits with the insolvency administrator (e.g. holiday compensation).

If you continue to work after insolvency proceedings have been opened, you will continue to receive your full wages. Wage claims that arise after the opening of insolvency proceedings are claims against the estate and must be satisfied in full from the estate in advance.

Warning! There is a risk that there will not be sufficient "estate". One sign of this is that the insolvency administrator is not paying your wages.

Overtime that you worked before insolvency proceedings were opened are insolvency claims. You can register them as claims in the insolvency table. 

There is one exception to this: you can receive insolvency benefits for overtime that you worked in the last three months before the insolvency proceedings were opened.

If you continue to work, you are still entitled to holiday. Holiday can be requested from the insolvency administrator. Your holiday entitlement from the period before the insolvency event does not automatically expire as a result of the insolvency.

You receive insolvency benefits as compensation for lost income (salary/wages). For the three months prior to the insolvency event, you are entitled to insolvency benefits in the amount of your secured net wage (= net wage on your payslip). You get this money once.

You must submit an application for insolvency benefits to the relevant employment agency no later than two months after the insolvency event. If you miss this deadline, you will not receive any insolvency benefits. You can complete the application electronically and submit it together with all documents electronically.

You will need the following documents for your application:

• Insolvency benefits certificate (from the employer or the responsible insolvency administrator),
• A copy of your employment contract,
• Letter of dismissal (if you have been dismissed by the insolvency administrator),
• The last 3 payslips,
• File reference number of the insolvency proceedings.

You can also submit the application for insolvency benefits in paper form. The form to do so can be found here: https://www.arbeitsagentur.de/datei/AntragInsolvenzgeld_ba013115.pdf

If your employer no longer pays social insurance contributions due to insolvency, the employment agency will take over.

Your health insurance company must submit an application to the employment agency.

If you continued to work after the insolvency event and knew about it, you are not entitled to insolvency benefits. If you did not know about it, it is important to know when you found out about the insolvency. From this moment on, you will receive insolvency benefits for the 3 months prior to this. You only have 2 months from the moment you know about the insolvency to apply for this money. If you are only hired after the insolvency, you are generally entitled to insolvency benefits.

Please note: if the insolvency administrator pays your wages, you have to work.

If your employer has problems paying your wages and no longer pays you all or part of your wages, you may be entitled to insolvency benefits.

Conditions for insolvency benefits:

• An insolvency event has occurred (e.g. insolvency proceedings have been opened)
• You have filed an application for insolvency benefits with the employment agency within two months of the insolvency event
• You are an employee and work in Germany
• You work full-time or part-time, have a midi job, mini job or are a short-term employee, intern, student or pensioner.

Important! If the insolvency was rejected by the local court for “lack of assets", you are entitled to insolvency benefits.  

You are not entitled to insolvency benefits if you do not meet the conditions. You are also not entitled to insolvency benefits if your employment relationship is suspended. This is the case, for example, if you receive sickness or injury benefits, are on maternity leave or on parental leave.

You are not entitled to insolvency benefits if you do not submit an application or have missed the application deadline. 

You can receive unemployment benefits and insolvency benefits at the same time.

The insolvency benefits are offset against the unemployment benefits. The entitlement period in which you receive unemployment benefits is not shortened by the insolvency benefits.

If your employer is insolvent and you fall ill, the health insurance company will pay your sick pay. For the first 6 weeks, the difference between net salary and sick pay is paid by the employment agency.
 

Residence permit for the purpose of gainful employment

If you work in Germany, you need a valid “Aufenthaltserlaubnis mit einer Gestattung der Berufstätigkeit" = residence permit with permission to work / a work permit. The responsible Foreigners' Registration Office can restrict your residence permit to a specific job and/or a job with a specific employer. This type of extra provision is either included directly in the residence permit or on the so-called "Zusatzblatt” (supplementary sheet). If you have worked as stipulated in the extra provisions of your residence permit, you can apply for insolvency benefits.

Insolvency benefits as a refugee

If you have a residence permit with the extra provision "Erwerbstätigkeit gestattet" (gainful employment permitted), then you are allowed to carry out any employed or self-employed activity. If you have a temporary residence permit or tolerated stay permit, you usually need a work permit from the Foreigners' Registration Office.

Insolvency benefits without a work permit

If you have worked, you are generally entitled to a wage, even if you have worked without a (valid) work permit. Then you may also be entitled to insolvency benefits. You should seek advice from your Fair Integration advice centre!

The general rule is that if you have worked, you are entitled to a wage. However, if you work illegally/without being registered/Schwarzarbeit, you may run into problems: The employment agency will check your employment relationship on the basis of the application for insolvency benefits. If they discover that you are not registered, the agency will report you and your employer to the Finanzkontrolle Schwarzarbeit at the customs authorities.

Illegal employment can be prosecuted. If you also received benefits from the employment agency, the job centre or social services while you were not registered for work, you will have to pay the money back. Depending on how much money you received, you may face a fine or criminal charges.

If your company is taken over by another owner, you will also be taken over. That's why you can't be dismissed.

Important: you have the same rights and obligations at the new company. The length of time you have been with the company doesn’t change either.

The purchaser of the company therefore enters into the employment contract. You don’t have to sign a new employment contract. If you do not agree with the transfer of the company, you have 1 month to object in writing. Then there is a risk that you will be dismissed for business-related reasons.