What is foreclosure?

Foreclosure - a scary word for many. But what actually is a foreclosure? Foreclosure refers to the process during which a creditor enforces a claim towards a debtor using the means of the state. Such a situation can occur if the debtor has not fulfilled his/her obligations even after a reminder was issued and the creditor or a service provider commissioned by him has obtained an enforceable title in court. In this case, the creditor has various official means to assert his/her claim - even by force.


What does foreclosure mean for the debtor?

Generally, it is always advantageous for a debtor to prevent foreclosure. After all, the negative consequences can be very unpleasant. Ultimately, a debtor can be listed in the public debtors' register after the submission of a disclosure state (in the past: affidavit in lieu of an oath, colloquial terms: "oath of disclosure"). This makes any commercial activities requiring a certain level of solvency significantly harder. If you happen to be in financial difficulties, you should contact the competent collection company forthwith. Do not simply ignore things. If you do not respond, the creditor often has no choice but to effect foreclosure.

What is foreclosure in theory?

Creditor and collection agency initially try to collect an account out of court. If these efforts remain fruitless, they try to cover the account through judicial dunning proceedings. In this case, the collection company petitions the court for a default summons and enforcement order on behalf of the creditor. Among other things, an enforcement instrument constitutes the legal precondition for foreclosure. This instrument is a request for payment by the court, and it establishes in binding form whether the debtor owes the creditor anything and exactly how much is owed.

These enforceable instruments include enforcement orders which a creditor obtains through judicial dunning proceedings. Moreover, court rulings of any type, cost assessment rulings, rulings establishing alimony, settlements or notarial deeds are enforceable instruments which can lead to foreclosure.



What is foreclosure by a bailiff?

To effect foreclosure, the creditor can use the official enforcement bodies, such as a bailiff. A bailiff is an independent body for the administration of justice. Bailiffs are assigned to a local court, but they have their own offices. With a valid instrument, such as an enforcement order, the bailiff can proceed to effect foreclosure if the debtor does not avert this by paying the overdue claim. To do this, the bailiff can enforce foreclosure of the debtor's personal property. If the debtor owns valuables, such as jewellery or antiques, the bailiff places a sticker with his seal on these items. These are then sold at a foreclosure auction, and the proceeds of the auction are used to settle the creditor's claim. However, items safeguarding the debtor's commercial livelihood, such as clothing or items the debtor needs for his work, must not be attached. 

What is the foreclosure of financial claims?

Under a so-called order of attachment, valuables are not auctioned off. Here, the focus is usually on the debtor's salary. In this case, the court of execution attaches the debtor's claim towards his/her employer. As a result, the employer is obliged to pay out the attachable part of the debtor's salary to the creditor rather than the debtor, until the claim is settled.