BUONPANE v. GERMANY
Inadmissible
Ireneu Cabral Barreto
The applicant, Mrs Agatina Buonpane, is an Italian national, who was born in 1963 and lives in Runkel. She is represented before the Court by Mr Georg Königstein, a lawyer practising in Brechen-Niederbrechen. The facts of the case, as submitted by the applicant, may be summarised as follows. The applicant owed 81,875.18 DEM (German marks) to more than twenty creditors. She had made an unsuccessful attempt to obtain discharge of the residual debt on the basis of a debt reorganisation plan. However, the majority of the creditor’s refused to agree to this plan. On 8 May 2000 the applicant applied for legal aid with a view to initiating insolvency proceedings and achieving discharge of residual debt. On 10 May 200 the Limburg District Court (Amtsgericht) dismissed her request. Leaving the question undecided whether the legal aid provisions contained in the Code of Civil Procedure (Zivilprozessordnung) applied to insolvency proceedings, it considered that in the present case the proposed proceedings did not have sufficient prospects of success, since more than half the named creditors had refused to approve the applicant’s debt reorganisation plan. Pursuant to Section 309 § 1 of the Insolvency Statute (Insolvenzordnung), the insolvency court could not replace their objection by approval and the insolvency proceedings had to be considered as having failed. The applicant appealed against this decision. She maintained that if she were refused legal aid in the insolvency proceedings, she would be deprived of the possibility to proceed to the subsequent procedural steps provided for by the Insolvency Statute, namely the opening of insolvency proceedings and the grant of discharge for thee residual debt after the expiry of the period of good payment behaviour. To make a difference in insolvency proceedings between debtors who were able to pay the court costs and others who were unable to do so, would exclude the less privileged from being granted a discharge for the residual debt and breach their right to access to court. On 28 June 2000 the Limburg Regional Court (Landgericht) dismissed the appeal. It pointed out that the question of legal aid in insolvency proceedings, including the proceedings relating to discharge of residual debt, was controversial. Unlike bankruptcy proceedings where, in the absence of any positive effect for the debtor, legal aid had to be refused for lack of sufficient prospects of success within the meaning of Section 114 of the Code of Civil Procedure, insolvency proceedings could have a positive outcome for the debtor, namely to give the debtor the opportunity to achieve a discharge of the residual debt in accordance with Section 1 of the Insolvency Statute. However, this advantage could only be granted if previously an unsuccessful attempt had been made to settle out of court with the creditors on a basis of a plan and subsequently insolvency proceedings conducted until at least the discontinuation of the proceedings. In the present case the plan for the settlement of debts submitted by the applicant had not been approved by more than half the creditors. Their approval could not be replaced by the court. The out of court settlement proceedings must therefore be considered as having failed. The Regional Court added that in any event Sections 114 seq. of the Code of Civil Procedure were not applicable in consumer insolvency proceedings although there were no specific rules excluding the applicability of these provisions. However, the drafting history of the Insolvency Act made it clear, on the other hand, that the legislator did not intend to include expressly provisions on legal aid in the new law. A clarification of this situation had not occurred. The Regional Court pointed out that it was not its task to decide on the question whether such a clarification would be desirable, in particular having regard to the absence of sufficient financial means of most of the debtors and the purpose of discharging them from their remaining debts pursuant to Section 1 of the Insolvency Act. On 22 August 2000 the Federal Constitutional Court (Bundesverfassungsgericht), sitting as panel of three judges, decided not to entertain the applicant’s constitutional complaint considering that it did not raise any constitutional issue of fundamental importance and that there was no appearance of a violation of the applicant’s basic rights The Insolvency Statute (Insolvenzordnung) came into force on 1 January 1999. The law distinguishes between regular insolvencies and consumer insolvencies (simplified proceedings). The procedure is initiated at the request of the debtor or of a creditor if the debtor is insolvent. One of the major amendments in the context of the new insolvency law was the introduction of a special consumer insolvency procedure. If the debtor is a natural person, he or she may be discharged from his or her remaining debts. In accordance with the Insolvency Statute as amended on 1 January 2001, natural persons, who are not able to pay the costs of the insolvency proceedings, may be granted a delay in paying the costs. This facilitates the opening of insolvency proceedings which are in turn a precondition for achieving a discharge of residual debt. A central issue, namely the granting of legal aid, is still unresolved. The consumer insolvency procedure consists of three phases: 1. The debtor must seek an out of court-settlement with the creditors. Only if all creditors agree the plan the proceedings may be completed at this stage. 2. If his attempt to reach an agreement is unsuccessful, the court insolvency proceedings follow. The court attempts once more to arrive at an agreement between the creditors and the debtor on the basis of a debt reorganisation plan. The debtor must submit files detailing his or her assets and income, together with a list of creditors and their claims, to the court. Furthermore the debtor must prove that all attempts to secure an agreement with the creditors have failed. Where the majority of creditors agree to the plan, the court may substitute the approval of individual creditors under certain conditions. 3. After the opening of insolvency proceedings claims are examined and validated. The debtor’s assets are liquidated by a trustee appointed by the court. If the debtor settles with the creditors to the best of his ability, he is discharged from his remaining debts after a period of good payment behaviour. This period will be usually seven years.