When is there an entitlement to insolvency benefit?

An entitlement to insolvency benefit (Insolvenzgeld) only arises if an insolvency event has occurred. This is the case, for example, if:

• insolvency proceedings are opened in respect of the company’s assets
• the application to open insolvency proceedings is rejected for lack of assets
• the business is closed down completely and no insolvency application is foreseeably filed

Insolvency benefit can be paid for a maximum of three months before this event . This period is referred to as the insolvency benefit period.

Important:

• Before the proceedings are opened, the Federal Employment Agency (Bundesagentur für Arbeit) does not usually pay out insolvency benefit.
• Without further arrangements, a gap therefore arises: employees are waiting for money, and the company is often no longer able to pay.

This is precisely where restructuring concepts and pre-financing of insolvency benefit come in, in practice.