Garnishment trap for private pensions of self-employed persons

The Federal Supreme Court (BGH) decided in November last year (file no. IX ZB 89/05) that private pensions from an accident or occupational disability insurance of freelancers or self-employed persons do not enjoy seizure protection. The situation is similar in the case of occupational pension schemes. The Federal Court of Justice (BGH) even allows the insolvency administrator to collect them despite effective pledging and vesting (ref. IX ZR 138/04). Early provision for assets is therefore necessary for all concerned. In principle, therefore, only pensions and retirement pensions owed by the employer (civil servant) or an employer are covered by attachment protection. Then the seizure allowance of around 900 euros applies to single people and just under 1,400 euros to married people. In the case of occupational pension schemes for freelancers and self-employed persons, however, there is, in the view of the judges in Karlsruhe, “no scope from the outset for pensions to be protected against attachment”.
The dilemma for the self-employed
The BGH thus clarified that only salaried employees and civil servants who have established an old-age provision under insurance law for themselves or their dependants benefit from the enforcement protection. This refers exclusively to private pensions that are “established on the occasion of the termination of a service or employment relationship”. Continuing pensions of freelancers and self-employed persons are therefore not protected. Professionally self-employed people are only free to build up a small amount of garnishment-free assets from an insurance policy within the narrow framework of the Code of Civil Procedure. However, as this pension will usually be relatively small, these people will sometimes have to rely on supplementary social assistance later on.
BGH: unequal treatment constitutional
For the BGH this unequal treatment is constitutional (Az: IXa ZB 271/03): Thus self-employed persons still appeared to be in need of protection to a lesser extent, because the higher chances of earning a living, which are regularly connected with the exercise of their activity, also suggest a more extensive claim under enforcement law. In addition, the BGH also refers to a “higher responsibility and maturity” of the self-employed and freelancers.
Asset protection through different “asset spheres
Therefore, those affected should be well informed and advised in order not to be caught “cold” later. One option is what is known as asset protection. This involves the separation and formation of different spheres of assets. Professionally, these individuals should practice professional risk management. If possible combined with its own liability assets, which are separate from private assets. However, private assets can also be protected from creditor access in certain areas. There are quite complicated approaches, which also include solutions abroad or foundations, trusts and own funds. That is why those affected should arrange their own assets and provisions in good time. Trying to move assets to a safe haven at the last minute when insolvency looms is usually unsuccessful.
Author(s): Dr. Johannes Fiala, Attorney at Law, and Peter A. Schramm, Dipl.-Math.

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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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