What should you do in the event of foreclosure on your property?
Foreclosure is a process in which your property is forcibly sold to settle outstanding debts. For many, this is a last resort to cover their financial obligations. What does foreclosure mean for you and what steps can you take to avoid or prepare for this situation?
When and why does foreclosure take place?
Foreclosure takes place if you are unable to meet your financial obligations. It is typically initiated after several reminders and debt enforcement proceedings. The legal basis is set out in the Swiss Debt Enforcement and Insolvency Act (SchKG).
Common reasons for over-indebtedness and subsequent foreclosure are:
- Poor financial planning: unexpected expenses or inadequate budgeting leading to an inability to pay.
- Health problems: long-term illnesses or injuries can quickly lead to a mountain of debt.
- Unemployment: without income, you won’t be able to cover your expenses.
- Divorce: break-ups often end in financial strain.
If you cannot pay your debts, creditors have the right to apply for foreclosure to recover their outstanding claims.
Foreclosure entails not only financial strain but also considerable emotional strain. It is important that you seek help in good time and take advantage of the different types of support available.
How does foreclosure work?
The foreclosure process includes the following steps:
- Valuation of the property: a commissioned expert conducts an appraisal to determine the market value of your property. This valuation serves as the basis for the auction process.
- Announcement of the auction: the upcoming auction is made public. This announcement will be made at least one month in advance and published in the official journal and other media in order to reach interested parties.
- Preparation of the auction catalogue: an auction catalogue is created. It contains detailed information about the property, including photos and a description. This allows prospective buyers to get an idea of the property.
- Conducting the auction: the property is auctioned on the specified date. The highest bidder is awarded the sale, provided that their bid covers the pledged claims.
- Transfer of ownership: after the sale, the property must be handed over to the new owner. You must vacate the property within the specified period. If you refuse, an eviction order can be issued.
- Distribution of proceeds: the proceeds from the auction will be used to repay your debts. If the amount is insufficient, the outstanding debt remains.
How can you avoid foreclosure?
The first step in avoiding foreclosure is direct communication with your creditors. Agreements such as deferrals or instalment payments help to defuse the situation. An open and cooperative attitude often works wonders.
If you sell your property yourself before the foreclosure auction, you can control the sale process from start to finish and potentially get a better price. This is usually more expedient than an auction. Thanks to our free online valuation, you can find out the approximate value of your house in no time at all.
There is also a number of advisory bodies and government services that can help you get an overview of your finances and avoid over-indebtedness.
