What is pre-financing of insolvency benefit and how are wages paid on time in a crisis?

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.