Selling your home in collective debt settlement: how it works

Selling your home in collective debt settlement: how it works

If you want or need to sell your home in collective debt settlement, you cannot make that decision on your own. As soon as the labour court declares your application admissible, a sale requires the judge's permission and the proceeds go through the debt mediator. That sounds daunting, but the process is well organised. In this article you will read who decides what, how the sale works in practice and where you still have a say.

What collective debt settlement means for your home

Collective debt settlement is a court procedure for private individuals who can no longer pay their debts on a structural basis. The rules are set out in the Judicial Code (article 1675/2 and following). You file the application with the labour court of the place where you live. If the judge declares the application admissible, a debt mediator is appointed, often a lawyer.

From that decision onwards, a situation of concurrence between creditors arises. Ongoing seizures and enforcement measures are in principle suspended, and all your assets together serve as security for all creditors. For your home this has a direct consequence: you remain the owner, but without the judge's permission you may no longer take any action that falls outside the normal management of your assets. Selling a home, taking out a mortgage on it or giving it away certainly falls into that category.

The procedure is also registered in the Central Register of notices of seizure, delegation, assignment, collective debt settlement and protest. A notary checks this register for every sale. In practice, a sale that bypasses the debt mediator is therefore not possible, and that is not the intention either.

Does the home have to be sold?

Not always. The aim of the procedure is to restore your financial situation and, where possible, to let you go on living in dignity. Whether the home is kept or sold depends on the numbers: the size of the debts, the value of the home, what is still outstanding on the mortgage and what you can repay each month.

In an amicable settlement plan, the debt mediator proposes a plan that all creditors must agree to. It may include a sale, but it can also be a plan in which you keep the home and continue repaying the mortgage. If no agreement is reached, the judge can impose a judicial settlement plan. In that context the judge can also order the sale of assets, especially when the home has substantial equity that could repay a large part of what the creditors are owed.

Sometimes the initiative comes from you. A home that has become too expensive to maintain or pay off may be better sold before the situation gets worse. Discuss this with your debt mediator first: he or she has to request the sale from the judge.

Public or private sale: who decides?

The law starts from a sale under the rules of forced execution, so in principle a public sale through a notary. Today such a public sale usually takes place online via Biddit. You can read more about that route in our article on selling at public auction via Biddit as a seller.

On request, however, the judge can allow a private sale, also known as a sale by private agreement. This happens when it is likely to achieve a better price. For you and your creditors this is often the most attractive route: a well-prepared sale with viewings, a clear asking price and room for negotiation usually yields more than an auction under time pressure.

To convince the judge, a well-supported valuation helps. A free valuation of your home gives you a first indicative price, and a valuation by a licensed estate agent or surveyor is a strong argument in the application. In the end, the judge decides under which conditions the sale may go ahead and which notary executes the deed.

The sale in practice: step by step

A private sale in collective debt settlement largely follows the same path as a regular sale, with a few extra checks:

• Consult the debt mediator. Nothing happens without their cooperation. He or she files the request to sell and follows up the file.
• Permission from the judge. The judge approves the sale and often imposes a minimum price or other conditions.
• Choosing an estate agent. If an agent is brought in, this is done in consultation with the debt mediator, including the commission. Choose someone who knows the local market and has experience with court-supervised sales. By comparing estate agents you receive up to three proposals from licensed agents in your area, free of charge.
• Mandatory certificates. The usual seller obligations still apply in this procedure: the EPC, the inspection of the electrical installation and, in Flanders, the soil certificate and the asbestos certificate. These costs are paid in consultation with the debt mediator.
• Offer and preliminary contract. Accepting an offer and signing a preliminary sale agreement (compromis) happens within the conditions set by the judge. Never sign a compromis yourself without the debt mediator's approval.
• Deed at the notary. The notary executes the deed and makes sure the home is transferred to the buyer free of mortgages and seizures.

Where does the sale price go?

The proceeds do not land in your own account. The notary first pays the creditors with a preferential right or mortgage on the home, usually the bank that granted your home loan. What remains goes to the account the debt mediator manages for your file. It is then distributed according to the settlement plan and the legal order of priority among creditors.

If money is left over after all debts have been settled, it comes back to you. If the proceeds do not cover everything, the settlement continues for the remaining debts. How an outstanding loan is repaid when you sell is also explained in our article on selling a house with an outstanding mortgage.

A realistic asking price is therefore in everyone's interest. A price that is too low harms your creditors and increases your remaining debt. A price that is too high keeps the home on the market for months while costs keep running, and the judge may still order a public sale.

Frequently asked questions

Can I sell my home during a collective debt settlement?

Yes, but only with the permission of the labour court. After the decision of admissibility, you may no longer take actions that fall outside normal management. The debt mediator files the request to sell with the judge.

Will my home always be sold at public auction?

No. The law starts from a public sale, but the judge can allow a private sale if it is likely to achieve a better price. A well-supported valuation helps to show this.

Can I choose an estate agent myself?

You can make a suggestion, but the choice and the agreements on commission are made in consultation with the debt mediator and within the judge's conditions. That is why it pays to compare a few local agents beforehand.

Will I get anything back from the sale price?

Only what remains after the mortgage lender and the other creditors have been paid according to the settlement plan. The proceeds go through the notary and the debt mediator, not through your own account.

Final thoughts

Selling a home in collective debt settlement takes more consultation than a regular sale, but you do not have to face it alone. The debt mediator and the judge oversee the procedure, and the notary ensures a correct transfer. Your most important contribution is good preparation: a realistic price, the required certificates and an estate agent who handles the sale with care. Want to know what your home is worth or which agents are active in your area? Request a free valuation or compare up to three licensed agents, free and without obligation. For legal advice on your own case, your debt mediator remains your first point of contact.