Every eleventh person in Dresden is over-indebted

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What is the difference between over-indebtedness and indebtedness?

According to the precise definition, over-indebtedness occurs when a person “will not be able to settle his debts in the foreseeable future and neither assets nor credit options are available to cover his livelihood”.

Over-indebtedness is a vicious circle from which those affected find it difficult to get out of themselves. Because unlike with pure debt, neither income nor money in the account is enough to pay off loans in installments. Then the indebted can no longer afford their rent and food – without going into further debt.

Where is Dresden on the national average?

According to the debt atlas, over-indebtedness in Germany fell slightly in 2020. While it was 10 percent in 2019, this year it is 9.87 percent. This means that 6.85 million citizens in Germany are over-indebted, around 69,000 fewer than in the previous year.

In Dresden, the proportion of over-indebted residents over the age of 18 is 9.25 percent, slightly below the national average. 41,625 people here can no longer pay their debts from their own resources. Compared to the previous year, these numbers are also relatively constant. Around 400 people were able to free themselves from the debt trap, a decrease of 0.2 percent.

Overall, the numbers are quite impressive. After Mainz, Potsdam and Munich, Dresden is the German state capital with the fourth lowest overindebtedness rate. In addition, Dresden beats the average both in the eastern federal states (10.2 percent) and in the west (9.82 percent).

How does Dresden fare in a comparison across Saxony?

In a comparison of the major cities in Saxony, Dresden scores well when it comes to over-indebtedness. In Leipzig the overindebtedness rate is significantly higher than in the state capital, because here 12.5 percent of all adult residents are caught in the debt trap, i.e. 3.5 percent more than in Dresden.

Chemnitz also has an above-average number of over-indebted citizens. Here it is 11.9 percent. Overall, Dresden is in the middle of the district and independent cities, according to Creditreform Dresden press spokeswoman Annett Grimm.

The lowest overindebtedness rate is around 7.8 percent in the Ore Mountains, while Bautzen and the Saxon-Switzerland-Eastern Ore Mountains also have positive figures with less than eight percent.

What is the situation like in the Dresden districts?

Although Dresden has a below-average over-indebtedness rate and is thus in a significantly better position than cities like Cologne, Frankfurt and Düsseldorf, one problem in particular emerges here: the gap between the districts is growing ever wider.

In Langebrück, Weixdorf and the Weißen Hirsch, only between 3.3 and 4.3 percent of all residents are over-indebted. Since 2004 the rates have been falling slightly here year after year. The situation is different in the Dresden neighborhoods known as problem areas. Over-indebtedness in Prohlis has skyrocketed by 6.8 percent in the past 16 years, and by 7.4 percent in Gorbitz.

There is light at the end of the tunnel in Pieschen. The fact that the district is increasingly becoming an attraction for well-educated young people and is shedding its dirty image is also shown by the over-indebtedness rate. It has fallen by 3.8 percent in Pieschen since 2004.

How does Corona affect over-indebtedness?

How can it be that, despite the Corona measures, not more people have become over-indebted? Thomas Schulz, authorized signatory at Creditreform in Dresden, assumes that the bomb will burst later and that the overindebtedness rate will not rise significantly until 2021. “The effects of the corona pandemic have not yet reached consumers,” says Schulz.

The reason: “Due to its small-scale structure, the economy in the Free State is proving to be particularly crisis-proof. At the moment, layoffs are still being avoided through state support measures such as short-time working allowance,” said Schulz.

But in the coming year “failed self-employment will gain in importance as the main cause of over-indebtedness,” he is convinced.

What experiences do debt advisors have?

Gregor Gantert is a debt counselor at the AWO in the Prohlis district of Dresden. The employees are already noticing the negative effects of Corona.

“Here in the quarter, many people have precarious jobs, for example, work in cleaning companies and earn little. If these people lose their jobs or have to take short-time work, they are quickly no longer able to service their contracts,” says Gantert.

In general, the annual number of inquiries to the debt counseling service of the AWO in Prohlis has been increasing for years. It is often a matter of survival, says Gantert.

“Someone who lives by the rule set has no chance of making a mistake.” A signature on a contract is enough to land in the debt trap. “Without financial resources, the risk is much higher,” says Gantert, explaining the growing gap between the districts.

In addition, migrants and less educated people in particular often do not understand what they have signed. “You often cannot assess the consequences either,” says Gantert.

He also observes that there are many more front door and telephone representatives out and about in socially more difficult areas. These would take advantage of the fact that many of the people living there know too little about their rights, such as the right of withdrawal from contracts.