Bad credit rating despite discharge from residual debt? How can the discharge from residual debt be successfully deleted from the credit rating? Dr Thomas Schulte, a lawyer in Berlin, explains the challenges of deletion.
For many people, discharge from residual debt is a longed-for fresh start after often years of financial strain. In the past, those affected had resigned themselves to insolvency, worked illegally and struggled through life with social assistance. Since 1997, there has been the option of private insolvency with discharge of residual debt. However, the relief that comes with it is often overshadowed by a cloud that lingers for a long time: the entry in the credit reference agency (Schufa). This supposed blemish of the past remains for many affected even after debt relief, like a millstone around the neck. But is there a way to have the residual debt discharge deleted from the Schufa? What legal bases provide a starting point for this and what special circumstances could support such a claim?
The role of Schufa in economic life
First of all, the Schufa (Schutzgemeinschaft für allgemeine Kreditsicherung) plays a central role in Germany’s economic life. It is a private company that has become increasingly powerful. It collects and stores data on the creditworthiness of companies and individuals and passes this information on to its contractual partners. This concerns banks, landlords, telecommunications companies and many other economic operators. A negative entry – such as the discharge of residual debt after insolvency – can have a significant impact. For many, this means a hurdle when applying for a loan, when concluding a rental contract or even for everyday things such as a mobile phone contract.
But Schufa is not omnipotent. It is subject to legal limits, in particular data protection law and the General Data Protection Regulation (GDPR). These regulations set clear limits on data storage and processing and serve to protect the rights of the individuals concerned. This means that data may only be stored for as long as is proportionate and necessary. But how is this implemented in practice?
Data protection basis: Article 17 GDPR
A key instrument available to data subjects is Article 17 of the GDPR – the right to erasure of data. This article gives individuals the right, under certain conditions, to request the erasure of their personal data. This may be the case if the storage of the data is no longer necessary for the original purposes or if the data has been unlawfully processed.
The question is, therefore, whether a discharge of residual debt can fall under this regulation? In principle, Schufa stores this information for three years after the date of issue of the discharge of residual debt. Many affected individuals perceive this duration as unjustified, especially if they have stabilised economically after their debt relief. Since April 2023, the granting of a discharge of residual debt has only been stored in Schufa for six months. Previously, the storage period was three years. This change was prompted by pressure from courts and data protection issues in order to facilitate the financial rehabilitation of debtors.
Storage details:
Data that is deleted after six months: Information on the discharge of residual debt, entries about the insolvency proceedings, flags for settled claims.
Automatic deletion: Schufa is committed to automatically deleting all relevant data stored for more than six months.
Special circumstances: When is deletion justified?
However, the mere fact that a discharge of residual debt has been granted is usually not sufficient to demand the immediate deletion of the entry at Schufa. Special circumstances must exist that make further storage appear disproportionate. But what circumstances could these be?
Identity theft
A particularly serious case is when the discharge of residual debt has been granted due to debts incurred as a result of identity theft. In such a case, the person concerned is not at fault, as they have been forced into insolvency by the criminal actions of third parties. In this case, it would be disproportionate to continue to list the discharge of residual debt as a negative entry at Schufa.
Incorrect data
Another starting point is the case where the data stored with Schufa is incorrect or incomplete. This can happen, for example, if incorrect amounts, incorrect creditor details or the incorrect date of the discharge of residual debt are stored. In these cases, those affected have the right to request a correction or deletion of the incorrect entries. It is therefore essential to regularly check your own Schufa information in order to recognise and correct any errors in good time.
Extremely long periods
Deletion could also be considered for very long periods. Although the GDPR does not stipulate any fixed periods for the storage of data, any further storage must always be proportionate. If the discharge of residual debt was granted many years ago and the person concerned has not had any negative financial incidents since then, this could be a reason to request deletion.
Enforcing the right to erasure
However, enforcing a right to erasure at Schufa is not a foregone conclusion. Schufa often acts defensively in such cases and shows little willingness to compromise. The process can be lengthy and often ends up in court. In such cases, it is advisable to seek the help of an experienced lawyer who can realistically assess the legal situation and take the necessary steps to enforce the right to erasure.
A guide: debt relief and the shadow of the Schufa, how to safely find your way out of the Schufa jungle?
It is possible to delete the residual debt discharge at the Schufa, but it is not an easy process. This can feel like an impenetrable jungle for those affected. But despite the challenges, there is help in getting out:
- Knowledge of the legal situation: The first step is to familiarise yourself with your own rights. The General Data Protection Regulation (GDPR), in particular Article 17, offers data subjects the right to have their data deleted under certain conditions.
- Identification of special circumstances: It is important to check whether special circumstances exist that justify deletion. These include:
- Identity theft: If the residual debt discharge was granted due to debts incurred as a result of identity theft, the continued storage of the entry in the Schufa is disproportionate.
- Incorrect data: Incorrect or incomplete data at Schufa can also justify deletion. It is therefore advisable to regularly check your own Schufa information.
- Extremely long periods: Even if the GDPR does not specify any fixed deadlines, the storage of data after a very long time can be disproportionate, especially if no further negative financial incidents have occurred since the discharge of residual debt.
- Legal support: Enforcing the right to deletion with Schufa can be difficult, as the credit reference agency often acts defensively. The support of an experienced lawyer can be of great advantage in this process. A lawyer can assess the legal situation in each individual case and take the necessary steps to enforce the right to deletion.
Navigating the Schufa jungle requires commitment, knowledge of one’s own rights and a strategic approach. Whether deletion is justified and can be successfully enforced depends on the individual circumstances. With the right approach and, if necessary, professional support, it is possible to have the entry deleted for the purpose of residual debt discharge and to enable a fresh start without encumbrances.
Those affected should not give up their rights without a fight and should not be intimidated by Schufa. Everyone has the right to a second start – even in the Schufa jungle. However, the path to this often requires the support of a lawyer who is familiar with the pitfalls and can create a ray of hope for you in the midst of the Schufa jungle.
The Schufa shadow: Deletion of the residual debt discharge from the Schufa