The creditor protectors of KSV1870 have investigated the causes of private insolvencies. According to the association’s analysis, ‘personal debt’ as a result of a ‘permanent overestimation of one’s own economic performance’ was the most common reason for bankruptcy last year.
With 8,845 debt settlement procedures opened in 2023, this was more than 8 percent more than the previous year. “A persistently high cost level and persistently high inflation have posed major financial challenges for Austrian private households in 2023,” says KSV expert Karlheinz Götze.
According to the KSV, 28.6 percent of these private bankruptcies occurred due to overestimation of one’s own abilities (2022: 28.1 percent). About a quarter of private bankruptcies occur among former self-employed persons. The most prominent representative of these private bankruptcies last year was probably former investor René Benko.
Covid is almost impossible to detect anymore
However, the financial aftermath of Corona (0.9 percent) does not play a relevant role. It can now be proven that Covid has not led to more private bankruptcies.
“We know from experience that people are much more careful with their financial resources in times of crisis,” says Götze. “Yet in 2023, almost 30 percent consistently spent more than they had available.” Young people in particular are more likely to live beyond their own financial means.
Youthful recklessness leads to bankruptcies
In the age group up to 25, the KSV attributes more than a third (34 percent) of cases to overestimating themselves; among 25 to 40 year-olds, this is 31 percent. As in last year’s survey, these two age groups are above the Austrian average. “The high level of debt among young people – mainly due to consumption – is a very worrying trend,” says Götze.
There are people in every age category who have lost sight of their financial resources. But: “This happens more often with boys, which also has to do with a lack of insight into finances.” Financial education must be more firmly anchored in the curricula. The KSV itself carries out several programs for this purpose.
Based on the results of the study, the KSV is calling for a return to a debt relief period of five years. There are currently three years left. This initially applies until 2026. “We believe that the repayment plan for private individuals has lost its justification,” says Götze.
KSV sees debt devaluation
“In practice, we also see that it is now very easy for people with debts to get rid of their debts relatively quickly, even though ‘personal debt’ is the dominant cause from the perspective of the KSV.” there are too many payment plan offers with zero percent. “As a result, both the average payment plans offered and the actual rounded rates have noticeably deteriorated – and this to the detriment of the creditors.”
If the current regulations remain in force beyond the limited period of 2026, there will be an increasing risk that individuals will become increasingly careless with their debts due to the rapid debt relief option. From the KSV’s point of view, this should not increase “personal debt” as the number one cause.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
