Naturally, none of us wants to get into foreclosure. The most prudent among us may find it risky to take out even a regular loan or hire purchase, while others use another loan to make ends meet and do not admit the possibility of over-indebtedness. So what is a reasonable rate and how do we go about avoiding foreclosure? And how do we defend ourselves if foreclosure occurs?
Enforcement is the process by which creditors enforce their claims when a debtor fails to pay their debts over a long period of time.
Victims of foreclosure can be divided into roughly four groups:
The first are the truly reckless people who do not think in long-term financial terms. They don’t make savings, and any major (even if expected) expense surprises them – whether it’s buying a new fridge, Christmas, or an outstanding utility bill. They then deal with these “unexpected” needs by borrowing, even for things that disappear before they make the first payment. Not surprisingly, with such an approach, the proverbial ear will be ripped off one day and all the payments cannot be met at once.
The second group is made up of people who take a much more responsible approach to life, but some tragedy or problems in life cause the finances to fall through. They may be single parents whose other parent is not paying child support and childcare does not allow them to work full time, but they may also be entrepreneurs whose business plan has failed, whether through poor judgement or, for example, due to a covid, a natural disaster, a war in the country in which they are doing business or other external circumstances.
The third group, which is fortunately in the minority, may be those who have all their financial affairs in order…except for some forgotten debt from the past that may have grown to enormous proportions. If they have moved to do so , not reporting their change of residence to the proper places, they may suddenly be surprised by a bailiff at their door without having suspected anything until now. This is how some debtors describe the situation. According to the bailiffs themselves, this category falls more into the category of urban legends, as it is not usually the case that someone had no idea that they owed money or that enforcement proceedings had been initiated against them.
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The last group are the real losers. People who don’t owe anything and haven’t owed anything, but perhaps they have a person living with them who has debts and the bailiff believes that the debtor’s belongings are in their house.
Yet each of these groups of people should focus on a slightly different area when preventing foreclosure.
As the Institute for the Prevention and Resolution of Overindebtedness has stated on its website, current figures show that the number of new foreclosures is still rising in 2022. In the first three months of this year, 116,115 foreclosures were initiated, compared to 104,303 in the first three months of 2021, while 76% of borrowers face multiple foreclosures. The increase is mainly due to the pandemic and, more recently, soaring inflation. However, the notion of seniors and single mothers as typical borrowers is more of a myth. The typical debtor is a man of working age, between 41 and 50 years of age. Women make up only 37% of borrowers in foreclosure.
Tip: We have described how to defend a foreclosure order in our article.
Many articles and books have been written about foreclosure prevention and we will probably not bring anything groundbreaking in this field. However, in the context of advice on how to protect your property from foreclosure, prevention is unmissable. Therefore, we cannot ignore it.
The key is to keep track of your finances, know your income and have a breakdown of what you spend your money on. A number of apps or even a simple excel spreadsheet can help you do this. Set aside part of your income and build up savings or invest it. The rule of thumb is to have cash on hand (in a savings account) for 3-6 months, and if you can build up a larger cash reserve, then invest. If you can’t and you are living paycheck to paycheck, then go through your spending list for several months in a row and look for where you could save. If you skip your favourite 70 kroner coffee on the way to work, you’ll have 1,500 kroner at the end of the month and 18,000 kroner at the end of the year. If you find more items like this, you can certainly save tens of thousands.
Carefully plan large financial commitments such as a mortgage or a higher-interest loan, both in terms of your future income and their purpose. Experts advise not to take on debt for anything that you will use up before the repayments have been made (Christmas, holidays) and, in general, for anything that is not an investment for the future. Taking out a loan for a car that will allow me to drive to a better-paying job or start a business is different from borrowing for a new car seat or a swimming pool.
Tip: Execution by deduction from wages and other 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 or her family, and what is the procedure for multiple garnishments? Find out in our article.
Closely related to the previous two points is this third one. First and foremost, pay your debts on time and keep all records of payments made, ideally going back up to five years. Keep a sufficient reserve set aside for regular expenses. If, on the rare occasion, you run into a problem with payment, “playing dead” is definitely not an option. Instead, contact the creditor as soon as possible and explain your situation. You can try to negotiate a deferred payment, or at the very least you will know where you stand. This may save you further liabilities in the form of court and enforcement costs.
If the matter has already progressed to the next stage and you have received a summons from the court, bailiff or pre-action notice from the creditor, it is a good idea to see a solicitor who can advise you on the most appropriate course of action and defend your rights in court.
If you are moving, first of all, inform all current and potential creditors and state authorities – your bank, insurance companies, the Czech Social Security Administration, etc. – of your change of address. This will prevent you from being unaware of any reminders or notices.
Tip: What not to do? For fear of the bailiff selling off the furnishings of the apartment, we definitely do not recommend reporting your permanent address to, for example, the municipal office. The bailiff will eventually get your real address and you will only increase the risk of not knowing about the essential steps concerning you.
If we have not been able to prevent the execution, we have several defence options depending on the stage of the proceedings.
An appeal can be lodgedagainst the order order for execution and the mandate of the bailiff, as well as against individual acts of the bailiff. It is also possible to appeal against individual acts (except those not permitted by law) which the bailiff takes An appeal may be lodged within fifteen days of service of the written decision appealed against.
The law allows for situations where a stay of execution may be requested for a certain period of time. This may be done on condition that, through no fault of our own, we find ourselves temporarily in such a position that the immediate enforcement of the decision would have particularly adverse consequences for us or our family members, without seriously damaging the position of our creditor. This may be the case, for example, if we suddenly become seriously ill and are caring for minor children.
Enforcement can be stopped either completely or partially. There may be various reasons for stopping the situation, for example, there may have been an oversight, a statute of limitations, a procedural error or a change in the situation.
The execution may also be stopped due to the debtor’s insolvency if it is established with certainty, after all the actions aimed at establishing the debtor’s assets have been carried out, that the debtor has not been found to have any attachable assets or that the value of the debtor’s assets is insufficient even to cover the costs of the execution.
We may file a motion to stay the execution with the bailiff within 15 days from the date we became aware of the reason for the stay. Within 15 days, the bailiff must invite all parties to comment on whether they agree to the stay within 30 days. If all the parties to the execution agree to the stay or if the 30-day period for expressing their views has expired in vain, the executor shall stop the execution. If not, the bailiff shall refer the proposal to the court for a decision.
If the inventory of assets includes items that do not belong to us (belonging to friends or relatives, for example), we can defend ourselves with a motion to exclude the item from the inventory. The time limit for filing the petition is 30 days from the time you become aware of the inclusion of the item in the inventory. If the executor refuses to exclude the property, you can apply for the same at the district court in your place of residence.
Tip: Sometimes the terms foreclosure and insolvency are confused. However, the difference between the two is significant. The purpose of enforcement is to recover a creditor’s claim, while the purpose of insolvency proceedings is to establish the debtor’s bankruptcy and its resolution. We have discussed insolvency proceedings in detail in our article.
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