Personal insolvency offers people in financial difficulties the chance to free themselves from debt and make a fresh start. The aim is to be completely debt-free again after a set period. But for property owners, the main question here is whether they can keep their property.
Personal insolvency: effects for property owners
Personal insolvency is a procedure that enables over-indebted persons to settle their financial obligations over a certain period of time or, under certain conditions, to have them partially waived.
For property owners, however, this usually means that their property has to be sold. The proceeds are used to service the creditors’ claims. In many cases, insolvency therefore leads to a seizure or even a forced sale of the property.
In which cases can an owner still keep their property?
In certain cases, a property owner can keep their home even during a personal insolvency. This is possible if the insolvency administrator releases the property from the insolvency estate. Such a release usually takes place if the potential sales proceeds would not significantly reduce the debts. The decision on this is at the discretion of the insolvency administrator, who must weigh up the interests of the creditors and the debtor.
What happens to real estate in personal insolvency?
In personal insolvency, selling a property is often a sensible way to reduce debts. Instead of risking a loss-making forced sale, owners should consider having the property sold by an experienced estate agent. An estate agent can accurately determine the market value and sell the property more quickly and at a fair market price. The higher proceeds are often more effective for debt repayment and help to minimize financial losses. Working with a professional at an early stage can be crucial here.
In which cases is a distress sale unavoidable?
A distress sale becomes unavoidable if the loan installments can no longer be paid or the value of the property has to be used to pay off the debts. In such cases, the insolvency administrator handles the sale, with the proceeds being used directly to pay off the debt. The owner usually has only limited influence and often has to expect a sale price below the market value in order to ensure that creditors are satisfied quickly.
Conclusion
Personal insolvency is often a major challenge for property owners. Whether a sale of the property is necessary depends on its value, the type of use and the debtor’s financial means. Often, unaffordable costs or the need to pay off debts make an emergency sale unavoidable.
Do you need to sell your property quickly at short notice? Contact us for comprehensive advice. We are at your side.
Notes:
For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where 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 individual case.
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