
Selling property before personal bankruptcy?
The decision on what happens to real estate during insolvency proceedings is made by the responsible insolvency administrator. Ultimately, it is their job to ensure that all creditors' claims are satisfied. Insolvency administrators often request that the property be sold or auctioned off so that the proceeds from the sale can be used to pay off the debts. The creditors must agree to this procedure. However, you can also apply for foreclosure yourself. This should be avoided if possible, as the properties are often sold below market value. It is not without reason that bargain hunters often flock to these auctions. Instead of foreclosure, the insolvency administrator may also decide to rent out the property. This can sometimes maximize the long-term proceeds.
Buy back the property or sell it before insolvency?
A property can be bought out of the insolvency estate. If, for example, a property is valued at €200,000 by an appraiser but is simultaneously encumbered with €120,000 in the land register, there is theoretically a surplus of €80,000. This would therefore be the value in the insolvency estate. This $80,000 can be paid into the insolvency estate as compensation.
Experts advise against selling the property quickly before filing for insolvency. This could have legal consequences. According to Section 133 of the Insolvency Code, this could be considered intentional discrimination against creditors and thus constitute a criminal offense. The last ten years prior to the application for personal bankruptcy are taken into account. If necessary, the sale can be contested. The sale would then have to be reversed. This, in turn, could result in claims for damages. In the worst case, the debtor could even be prosecuted.
Releasing real estate from the insolvency estate
If a property is only worth a small amount because it is dilapidated, for example, it can often no longer be used to pay off debts. This is because selling or auctioning it could then incur costs and thus reduce the insolvency estate. In such a case, the insolvency administrator can release the property from the insolvency estate and return it to the debtor. However, the debtor then remains responsible for maintenance and the associated costs. Real estate professionals know that this is almost never worthwhile if there are existing debts.
Experts recommend: If you want to sell your property before filing for personal bankruptcy, be sure to talk to the responsible insolvency administrator first!
Do you need to sell your property quickly and want discretion? Contact us! We will be happy to advise you.
Notes
For reasons of better 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 consult a lawyer and/or tax advisor to clarify the facts of your specific case.
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