What is pre-financing of insolvency benefit

In many proceedings, it is not enough for insolvency benefit (Insolvenzgeld) to be paid at some point. Wages should reach employees’ accounts on time. For this purpose, pre-financing of insolvency benefit (Insolvenzgeldvorfinanzierung) is often used.

The process in brief:

• A bank provides the company with a loan.
• From this loan, the net wages are paid out to the employees.
• The employees sign a declaration of assignment.
• Once insolvency proceedings have been opened, the Federal Employment Agency (Bundesagentur für Arbeit) calculates the insolvency benefit and pays it to the bank.
• This money is used to repay the loan in full or in part. Interest and fees are usually borne by the company or the insolvency estate.

Advantages:

• For employees:
  wages and salaries for the insolvency benefit period continue to arrive on time.
• For the company:
  scarce liquidity is conserved, the business remains stable and the chances of a successful restructuring increase.

The Worstbrock-Group prepares the pre-financing of insolvency benefit together with legal counsel, holds talks with banks and agrees the key points with the Federal Employment Agency.