Insolvency

How does 'the' German debtor react to the threat of filing for an insolvency action against him?

A creditor can indeed threaten to file for an insolvency action against the debtor. That is, he would force the debtor into an insolvency procedure. However, in praxis that has not proven to be much of a promising means. Creditors have to establish that they have tried to enforce their title before such an insolvency action will be accepted. Once this and other criteria are met the court will will have the financial constitution of the debtor examined by a lawyer or certified public accountant with a view to determine whether the debtor would be able to cover the costs of the insolvency procedure. The costs of this examination will have to be covered by the applicant and will only be recoverable if there are sufficient means on the debtor's side.

On the other hand however, it is the CEO of the GmbH, which is comparable to the ltd.(stemcapital of 25000 € though), who is under a duty to file for insolveny on his own motion three weeks after taking notice of excessive indebtness or illiquidity, i.e. inability to pay. A failure to do so amounts to an omission and renders the CEO of the GmbH personally accountable for all legal obligations after those three weeks.