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In order to cushion the financial consequences of the corona crisis, rents, credit cards and insurance premiums were deferred. These deferrals will expire at the end of March, from then on the arrears can be made due. The consequences of the economic crisis can already be felt at the debt counseling service in Vienna. In the medium term, one expects an increase of 30 to 40 percent in those affected who get into financial difficulties, says Bernhard Sell, he is a lawyer at the debt counseling service in Vienna.
“Company bankruptcies of 30 to 40 percent are to be expected”
These are people who have accumulated debts in the amount of 5,000 to 10,000 euros. From the point of view of debt counseling, these are rather smaller amounts, but they are already sufficient to cause those affected to become overindebted. In these cases, there would often no longer be any financial leeway to service loans or to settle rent arrears. There are also many people under the age of 25 among the clients.
In addition, there is concern about the workplace. The number of company bankruptcies actually fell in 2020, but this is primarily due to the state aid packages. If the Covid-19 aid expires, this effect will be reversed, says the debt adviser. All in all, there will be increases in insolvency of 30 to 40 percent, the experts agree.
Single parents and families are particularly affected
Artists, sole traders and restaurateurs are already looking for help from debt counseling. If then there is a wave of bankruptcies, people who are currently on short-time work will probably also be affected – and then have to struggle with job loss and back payments of rent and loan installments. This affects a lot of women, single parents and families with children. Part-time workers are also in a difficult situation, as are all people who had a low income before the pandemic, said the debt adviser.
Anyone who notices that servicing loan installments or even the costs of rent, gas and electricity are becoming a problem should not lose track of the expenses, says Sell. A budget book in which income and expenditure are compared is recommended in any case. It is also important to sound out potential savings at an early stage. This applies to forms of savings such as life insurance. It is counterproductive to save if, on the other hand, you can no longer meet your financial obligations, says Sell.
Debt counseling offers budget advice
If the account is permanently overdrawn, the fixed costs become a problem or you have to borrow money from friends more often, you should take the help of the debt counseling service. This also offers budget advice. If necessary, you should make an appointment for an initial telephone consultation rather quickly. There are still resources, but given the current situation, that could change quickly, according to the expert.
As part of the consultation, the case will be examined, and in the worst case, private bankruptcy proceedings can be applied for. As a result, access to one’s own account is restricted for a certain period of time, according to Sell. In addition, the name of the debtor is recorded in the edict file, a publicly accessible register held in the Ministry of Justice. The advantages would clearly outweigh the disadvantages, however, since one could pay off part of the outstanding liabilities and in this way lead a debt-free life again in the foreseeable future.
Volkshilfe can take over rent arrears
There are no state subsidies such as a fixed cost reimbursement for private individuals who are in need through no fault of their own, in the worst case only the way to charitable organizations or the social welfare office remains, says Sell. If, for example, there is a threat of eviction, there is the Volkshilfe Office for Housing Security (FAWOS) in Vienna. In cases of hardship, this can also cover rent arrears.
However, the award takes place under strict criteria, which are specified by the municipal department for social affairs, social and health law (MA 40). The income and expenditure situation will be examined, as will the question of whether the corresponding help has already been used and whether the rent has been paid regularly in the past. In all other federal states with the exception of Burgenland there are comparable institutions.
“Economic consequences can still be felt for years”
We are facing the biggest social crisis since World War II, says Robert Blum, the head of FAWOS. This will also be reflected in the number of homeless people. Five years after the Second World War, homelessness was highest in Vienna, and this process will continue gradually today. The expert expects a dramatic increase in the housing shortage over the next five years. Everything must now be done to protect people from losing their homes. The current financial resources available to FAWOS will not be sufficient to cope with the situation, said Blum.
When advising debtors, one expects a large number of clients from small and medium-sized companies in the coming months. This will also have an impact on the job market, many jobs will soon no longer be available, for example in the catering trade. A quick recovery of the economic situation cannot be assumed, says debt advisor Sell, we will feel the economic and financial consequences of the crisis for many years to come.
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