Debts: This is How Foreclosure Works

house, auction, public sale

If the debtor does not pay voluntarily, he is threatened with enforcement


What happens in a typical case when implementation is to be carried out, and the judicial officer is set in motion?


Enforcement is the state procedure by which the creditor can enforce his claims against the debtor by force.


This is important so that nobody resorts to self-help or even violence. Methods of the “Russian debt collection” type, in which two tree-long guys with broad shoulders and no hair on their heads stand outside the door and “ask” for payment, are prohibited. Because here, the line to nuisance is often crossed.


To be able to enforce his claim, the creditor needs an enforceable title. These are mainly judgments and enforcement orders. In the Becker case, the businessman had to go through two instances to obtain a legally binding and enforceable decision.


With the report, the creditor has a relevant title in his hand with which he can enforce his right if the debtor does not pay voluntarily.


The creditor can instruct the bailiff to enforce the debtor’s movable assets if the debtor owns valuable assets such as jewelry, paintings, furniture, or expensive cars.


The creditor goes to the debtor and first seeks the debtor’s advice. The debtor gets the last chance to pay voluntarily. If he fails to do so, the judicial officer may seize objects in the debtor’s home or business premises.


Usually, he does not take the items directly with him, but instead sticks a pledge seal on them, the so-called “cuckoo.” The seized objects are auctioned off at a later date.


The proceeds of the auction are used to cover the costs and paid out to the creditor.


However, items that the debtor needs for living or working cannot be seized.


These are, for example, items of clothing or the most necessary furnishings. If the bailiff does not find any prefab objects, the attachment has been fruitless.


By order of the creditors, the judicial officer may require the debtor to disclose his assets through an affidavit.


If the debtor refuses to take this previously mentioned “affidavit of disclosure,” he may be required to give the affidavit using detention. The testimony and the threat of imprisonment are also entered in a debtors’ register kept by the court.


An entry in the debtors’ register plays a vital role in the assessment of creditworthiness.


If a monetary claim is to be seized, it is not necessarily necessary to send the bailiff. The creditor has the possibility of having a debtor’s claim against a third party took.


The most prominent case here is the attachment of the debtor’s earned income. The commissioned enforcement court issues an order of attachment and transfer. This orders the employer to pay part of the salary directly to the debtor’s creditor.


However, the debtor is always left with a minimum subsistence level that depends on his personal life situation. Here, for example, it plays a significant role in whether he still has maintenance obligations towards his children or wife.


A foreclosure can also be directed towards the surrender of an item. The most notable case here is the forced eviction of an apartment.


If the tenant owes rent to his landlord, and the landlord has received an eviction order from the court, the bailiff must also take action. He will then have the entire apartment evicted, if necessary, by force and with help from the police.


Anyone who wants to have a foreclosure order carried out should contact a lawyer. This is because the procedure can turn out to be very complicated.


The lawyer knows how to make the applications correctly so that the creditor gets his money as quickly as possible.


Prevent foreclosure: If the loss of your home is imminent

Reasons for a compulsory auction

In most cases, real estate is forced into foreclosure because bank debts are no longer being serviced. Divorce, unemployment, or illness are frequent reasons why a financial shortage leads to owners no longer being able to meet their obligations.


It is also possible that the owner has already gone the way of private insolvency. At the latest, when the bank threatens to call in the loan, quick action should be taken before the bank initiates foreclosure proceedings.


Prevent foreclosure: Negotiations with the bank

Often negotiations with the bank can prevent the worst from happening. The following options are promising in many cases:


Reduce or suspend repayment: Particularly, if the financial bottleneck is only temporary, a reduction in the monthly installment to be paid can bring relief and possibly prevent property loss. However, because the interest rate is fixed, the only repayment can be reduced or suspended.


No bank is indeed obliged to enter into such a deal. However, because a foreclosure sale is usually not a good deal for a bank, the chances of such an agreement are good if it ensures the customer’s solvency. For the latter, however, there is a long-term negative consequence: it takes longer to repay the loan later on.


Imminent loss of real estate: What to do if the forced sale procedure has already been initiated?

If the bank applies for a compulsory auction, the competent local court will order it after a thorough examination. The debtor will receive proper instructions informing him of the possibility of applying for the temporary suspension of the proceedings within an emergency period of two weeks (ยง 30 ZVG).


The court will then hear both the debtor and the creditor and decide whether the proceedings are to be suspended. This can be successful for the debtor if he can show credibly that he can redeem the due claims within six months.


It is advisable to have a lawyer on hand at this stage to negotiate with the bank – this can increase the chances of reaching an agreement. This is particularly useful if it can be demonstrated to the bank that the reason for the payment default – such as illness or temporary unemployment – has ceased to exist or will soon cease to exist.


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