Protection on the creditors
Bad debt is commonplace in our economic system and occurs in almost every business. This affects retailers of all kinds in particular, but even service providers can be threatened by outages. Customers who do not comply with their payment requests, depending on the amount of a larger or smaller hole in the accounting. Although the default payments can be written off, the expected profits will then be eliminated. For these reasons, the protection in commercial law is clearly defined, so that one can also speak of the protection of creditors. Under this all legal regulations are to be understood, which is to prevent the debtor from the injury of the interests of its creditors.
Creditor protection regulations in the Civil Code
Banks lend loans to its customers on a daily basis, and despite all risk minimization measures, a certain residual risk remains. Banks distinguish between the risks between information risks and insolvency risks. In the former case, it is about the risk, which is received due to lacking or incorrect information. The bankruptcy risk describes the risk that makes it impossible for the bank to get the money back if the company files for bankruptcy. Also, the risk of loss should be mentioned at this point, because it describes a failure of the rates for the loan.
Banks try to use collateral from these circumstances. In the case of insolvency, for example, there is the segregation right, so that creditors are allowed to resort to the collateral despite a declared insolvency. Some creditors may also use their lien to offset their claims. For example, landlords are legally entitled to seize the valuables available in the home. Banks use the internal lien, so that they can rebook balance amounts in the event of insolvency or insolvency of the debtor. These come, for example, from other accounts such as passbooks or accounts of minor children.
Effective measures to protect creditors
Of course, the protection of creditors is regulated not only in the BGB, but also in commercial law. There are various accounting rules that are designed to protect creditors from lending due to lack of information. Certain valuation criteria of balance sheet law can be used for this purpose. One speaks of balance sheet truth, balance sheet clarity and balance continuity, so that banks can get an insight into the enterprises and set thereby the allocation of credits on sure legs. If companies violate these three elements of the accounting law, they make themselves liable to prosecution and can be punished according to the fraud.
Unfortunately, these things happen daily in our business world, so banks are still not 100 percent protected against losses. However, the risk of failure minimizes to a smaller percentage. Of course it is also important that the examination of the loan is carried out comprehensively, and of course by the bank, correctly.