Insolvency money pre-financing

Insolvency money is the amount paid to employees by the Federal Employment Agency if the employer is unable to pay wages due to insolvency.

In this section we would like to briefly explain the procedure if the insolvency money can be paid within the framework of a pre-financing approved by the Federal Employment Agency.

With regard to the claim for insolvency money itself, we refer to our comments on insolvency money.

Who can participate in pre-financing for insolvency money?

Only employees whose employment relationships still exist at the time of payment may participate in the pre-financing of insolvency funds. Furthermore, the work performance must be claimed. There is no legal entitlement to pre-financing of insolvency money. Employees who have already left the company, who are released from performing work, who exercise their right of retention to perform work or who already receive services from the employment agencies or job centres as wage replacements cannot participate in advance insolvency money financing.

Who carries out the prefinancing?

As a rule, the pre-financing of the insolvency monies is carried out by a bank in coordination with the insolvency administrator (also the own administrator) and the Federal Employment Agency. As a rule, the pre-financing is organised by an authorised representative (e. g. by us) and carried out by order.

Which documents are needed for the pre-financing?

You have to provide the following documents:

  • Purchase agreements (also called partial assignment agreements or purchase contracts)
  • Declaration of consent for data exchange

In special cases, it is still necessary to file a personal application for insolvency money with the Federal Employment Agency. If applicable, you will be informed separately by the pre-financing implementing body.

Do I have to file an application for insolvency money myself if I participate in the pre-financing?

No, you may not submit your own application, otherwise you will not be able to participate in the pre-financing. If you have already submitted the application, please do not hesitate to contact us. Should the need nevertheless arise in the course of the provisional procedure, you will normally be invited to submit an application by the implementing body.

Can the purchase agreements be changed?

No, the purchase agreements are specified by the pre-financing banks. Changes to the contents of the contract or deletions shall render the contracts null and void. The purchase agreements provided by us are prepared accordingly, so that you can make necessary changes on the backs of the contracts. This affects name and address changes as well as bank details. If changes are to be taken into account, you must confirm the changes with your signature.

The contracts must be signed with your original signature prior to payment. If you are unable to work due to holidays, please contact your personnel department or us in good time.

What do I sell with the insolvency money purchase agreement?

You sell your insolvency money claim to the pre-financed bank. However, the upper limit is the income threshold for unemployment insurance. To this must be added the employer’s contributions to voluntary or private health, nursing care and, if applicable, pension insurance.

What happens if I do not want to return the purchase agreements?

If you do not return your purchase agreements, you will not be able to participate in the pre-financing. You are free to file an application for insolvency money with the Agentur für Arbeit yourself, but the latter can only pay if the insolvency event has occurred or your employment relationship has been terminated beforehand.

What is the purpose of the declaration of consent for data exchange?

According to the basic data protection regulation, we are obliged to inform you of the exchange of your personal data with third parties, e. g. to carry out pre-financing. You must confirm this by signing the form. If, contrary to expectations, you do not agree, you cannot participate in the pre-financing of insolvency money.

What does it cost me to participate in the pre-financing?

Participation in the pre-financing of your insolvency claim is free of charge for you as an employee.

Are any interest arising due to late payment also covered by insolvency money?

No, the claim for insolvency money is processed by the Federal Employment Agency only after the insolvency event has occurred. The pre-financing only serves to improve the chance of the company’s restructuring and the preservation of jobs. Interest losses resulting from late payment are attributable to the personal risk of the employee and are not covered by insolvency money.