Watch out for ‘Insolvenzanfechtung’ when doing business with Germany

You may be doing business with German companies from the border region. If that is the case, you should realize that in Germany there is the phenomenon of “Insolvenzanfechtung”. If your German customer goes bankrupt, you may have to deal with a recovery order from the German bankruptcy trustee. This can be done up to 4 years ago! It is good to be aware of this.

Recovery of payments in the event of bankruptcy of your German customer
Under German bankruptcy law (‚Insolvenzordnung‘), the bankruptcy trustee has the option to dispute claims already paid and to reclaim payments from you and add them to the bankruptcy estate (the so-called actio pauliana). This is to prevent companies from acquiring an advantaged position at the expense of other creditors. This can occur because they are exerting increasing pressure on their ailing customers or by agreeing on installments. In addition, the bankruptcy trustee can intervene when payments are withdrawn from the bankruptcy estate shortly before the bankruptcy application to privileged persons and companies.

How about that?
The legal rules in Germany have been tightened. They make it possible for a bankruptcy trustee to reclaim a payment if you as a supplier or supplier could have been aware of the intention of your customer to disadvantage other creditors. This presumption already exists if you were aware of the impending insolvency of your customer. According to the highest German court, this could be deduced from your customer’s slow payments, the agreement of payment arrangements or the enforcement of a judgment.

Evidence to the contrary is difficult
Only if you can provide proof to the contrary that the payment arrangements were actually intended to improve the solvency of your customer, the recovery of the payments received can be prevented. Experience shows that in most cases this is difficult to prove. We are now aware of several recovery actions, whereby the payments received had to be refunded. A major financial loss, because years of turnover are much more than an outstanding balance.

Protection against risk of recovery in bankruptcy
If you do business and your customer goes bankrupt while, for example, you have made a payment arrangement for the past 4 years, the bankruptcy trustee may reclaim all payments received by you from the payment arrangement. This risk is particularly high in Germany, but it can also arise in other countries. In Germany, it is stipulated that, depending on the situation, payments can be recovered over a period of up to 4 years before the bankruptcy. The MODINT Branch Policy has the option to protect you against this.

How to prevent?
It is wise to tighten up debtor management when exporting to Germany. Certainly when invoices are not paid on time or not in full, all alarm bells should go off. Do not just accept a payment arrangement and consult with the customer and us how to solve this. For more information about Insolvenzanfechtung, how to prevent this or how to deal with it, please contact MODINT Credit & Finance, telephone +31 88 5054700 or e-mail

Source: MODINT Credit & Finance
Photo: Shutterstock

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