
Personal bankruptcy – what happens to my property?
What does personal bankruptcy mean for property owners?
Personal bankruptcy is a procedure that allows individuals who are heavily in debt to pay off their debts over a fixed period of time or have them partially waived. As a rule, a debtor in personal bankruptcy cannot keep their condominium or house, as these are considered part of their assets and are therefore subject to liquidation. This means that they are seized and then sold at a foreclosure auction.
Under what circumstances can I keep my home despite insolvency?
Even in insolvency, you can keep your home under certain conditions. Through the insolvency administrator, you can obtain a so-called release, whereby your home is removed from the insolvency estate. The prerequisite for this is that the debts are higher than the possible sale value. The insolvency administrator decides on this, often in favor of a release, if the proceeds from the sale would not sufficiently satisfy the creditors.
Do I have to move out of my property in the event of insolvency?
Debtors do not have to leave their property immediately in the event of personal bankruptcy, but a sale or foreclosure may take place during the proceedings. It is therefore advisable to prepare for a possible move at an early stage and to consider alternatives such as renting an apartment. Consulting a debt counseling center or a lawyer will help you better understand your rights in the bankruptcy proceedings.
Rented property: What happens in the event of personal bankruptcy?
In the case of rented property, the insolvency administrator usually checks whether a sale can contribute to the repayment of debts. Since such properties are considered capital investments and are not essential for living, they are usually sold in the event of personal bankruptcy, which means the owner loses the property.
Distressed sale: When is it unavoidable?
A forced sale becomes necessary when loan installments can no longer be paid or the value of the property is used to pay off debts. In personal bankruptcy, the insolvency administrator organizes the sale, and the proceeds go into the bankruptcy estate. The owner often has little influence and must often expect a quick sale below market value in order to satisfy the creditors quickly.
Conclusion
For property owners, personal bankruptcy often means a major setback. Whether the property is sold depends on its value, use, and the debtor's financial options. A distress sale is usually unavoidable if the costs are no longer affordable or the property is needed to pay off debts.
Are you a property owner and have questions about personal bankruptcy? Contact us! We will be happy to advise you.
Notes:
For reasons of readability, the generic masculine form is used in this text. Female and other gender identities are expressly included insofar as this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please have the facts of your specific case clarified by a lawyer and/or tax advisor.
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