Execution on the debtor’s income is one of the first options that bailiffs focus on. What income, other than wages or salary, can be affected? What is the minimum amount that will be left for the debtor and his/her family, and what is the procedure for multiple foreclosures?
The idea of someone “arbitrarily” deducting a portion of my wages is probably not the most appealing, but within the limits of the options offered by law, garnishment by deduction from wages is still a relatively economical option. This form of garnishment in the law comes right after garnishment of a debt from a bank account, or, in the vernacular, execution on account. This is the order given by law, which the bailiff must respect.
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The main income targeted for execution is, of course, wages or salary. It is essentially the same, i.e. a monetary benefit provided for work by an employer, with the difference that salary is paid to employees of the state, municipalities or contributory organisations, while wages are paid to employees of private employers. The calculation is made on the entire net salary, including bonuses. However, the net wage does not include the tax bonus, as well as travel allowances or compensation for wear and tear on own tools or equipment.
In addition to salary or wages, other types of income for work (such as activities under various agreements) or income that replaces or is provided in addition to wages (such as sick pay or maternity pay) can also be covered.
Under the law , all such income may be affected:
Tip: We have discussed how to prevent foreclosure in our separate article.
The total uncollectible amount of a particular debtor is a certain amount of money that can never be deducted. It is calculated as the sum of the uncollectible amount for the debtor himself and all the uncollectible amounts for dependants. It may therefore be slightly different for everyone depending on their family circumstances.
According to the Ministry of Justice, it is:
However, this does not mean that this non-forfeitable amount is set and the rest of the salary goes to pay the debts. The reality is a bit more complicated.
The principle of deductions from wages is based on a one-third system. If there are multiple debts and garnishments, then the first third of the debtor’snet wages is used to satisfy the creditors’ non-priority claims. The second third is then used to satisfy the so-called priority claims of the beneficiary, and if this is insufficient, the first thirds can also be satisfied. The third third of the debtor’s net wages, together with the non-forfeitable amount, remains with the debtor.
Thepriority debts to be satisfied in the context of enforcement are primarily maintenance, and then, for example, compensation for personal injury, tax debts, health or social insurance debts, compensation for damage caused by intentional crime, etc.
Tip: Social security or health insurance debt can build up quickly – just forget one payment or fail to pay the full amount and you’re done. On top of that, there are penalties and you could be in for a nasty surprise. So how exactly does it work if you’re self-employed and what if your employer doesn’t pay your insurance? Find out in our article.
Non-priority debts are various fines for illegal driving, unpaid loans, unpaid electricity, gas or other utility bills, etc.
It is only the sum of the uncollectible amounts plus at least one-third or even two-thirds of the remainder of the net wages (if withheld for non-priority claims) that remain after deducting the uncollectible amounts that make up the debtor’s total uncollectible minimum.
To shed more light on the whole system, let us take an example:
Ms Alena had an unpaid debt for her phone with the operator, which she had not paid and which had grown into a foreclosure. Ms Alena is single and has one dependent child. She still receives maintenance for him in the amount of CZK 3 000, but he is not subject to execution. We therefore count one amount per debtor and one per dependent within the non-forfeitable amounts. Mrs Alena’s net salary is CZK 27 000. The execution relates to an unpaid debt with the operator, i.e. a non-priority claim.
The amount to be seized for the debtor is CZK 12 704, plus CZK 3 176 for the dependent. This brings the total amount of the uncollectible amounts to CZK 15 880. After deducting the total amount of the uncollectible amount from the net salary on which the deductions are calculated, this leaves CZK 11 120.
This amount is divided into three thirds of CZK 3 706 each, leaving CZK 1. Since only one third of the remainder of the net wages is deducted for the non-preferential claim, that leaves Mrs Alena with two thirds of the remainder of the net wages, so 2 × CZK 3706, and a total non-withdrawable amount of CZK 15 880 and CZK 1, which together amounts to CZK 23 293, which may not be deducted from Mrs Alena’s net wages.
Tip: to calculate garnishment by deduction from your wages, you may find a calculator on the internet useful.
In order to protect debtors from hitting rock bottom, the so-called protected account has been introduced. Debtors who have more than one execution and who also have a bank account attached can now set up a protected account so that the remaining part of their salary, the so-called non-forfeitable amount, can be sent to their account and they can still dispose of the funds. The money cannot then be withdrawn from this account because of the execution.
Tip: No method of foreclosure is pleasant, but foreclosure by sale of property stirs the most emotions. You can read how the foreclosure sale and auction of movable property works in our next article.
Since a self-employed person usually does not have one main source of income, but has it scattered among many entities and usually throughout the month, it is much easier to execute the execution by seizing the account. In official terminology, this means attaching a debt. In such a case, the court will order the bank not to allow the debtor to withdraw or transfer money up to the amount of the debt to be recovered. The bailiff will first warn the bank and then the debtor so that the money cannot be withdrawn quickly. The account is then blocked for at least 30 days, after which the bank is not allowed to do anything with the money in case, for example, the execution is stopped. After that, if there is enough money in the account, the bank sends it to the bailiff. Otherwise, the whole anabasis takes much longer. The rule is that when the account is seized, the debtor must always have three times the minimum subsistence level left, which the debtor is allowed to withdraw in one lump sum. Currently, this amount is CZK 14 197.
However, if such an option is not an option for some reason, or if it covers only part of the debts, the entrepreneur’s income can also be targeted. Especially in the case of a self-employed person operating under the so-called shvarcsystem, the deductions can be applied quite easily. However, there are a few differences compared to deductions from wages:
The debtor (entrepreneur) is then left with 3/5 of the gross income provided that non-priority claims are satisfied in the execution and 2/5 of the gross income if priority claims are satisfied in the execution.
If the above-mentioned Ms Alena worked as a self-employed person and her income was CZK 27,000, then she would be left with CZK 16,200 under the enforcement of non-priority claims, which would be a relatively significant disadvantage compared to the situation where she was employed.
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