The legal seizure by the enforcement directorate of assets belonging to the debtor, upon application by the creditor on account of an unpaid debt, is termed attachment. The framework of this step is drawn in detail in the Enforcement and Bankruptcy Act No. 2004.
Looking at practice, the headings that give rise to the greatest uncertainty and lead to erroneous steps are these: which property attachment may be applied to, when and how the step is to be carried out, the powers afforded to the debtor, and the situations in which an attachment may be challenged. Incorrect information is particularly widespread as regards salary attachment, the claim that the property is the debtor’s dwelling, property kept outside attachment, the appointment of a judicial custodian and attachments directed at the assets of third parties.
In this briefing note we address the legal meaning of attachment, the consequences awaiting the debtor, the limits of the powers afforded to the enforcement officer, the practical problems frequently encountered during an attachment and the errors capable of causing a loss of rights, in the light of the legislation and settled practice.
The Definition and Legal Character of Attachment
What Does Attachment Mean?
Attachment is the legal restriction of the power to dispose of assets belonging to a debtor who has failed to perform their obligation in enforcement proceedings that have become final, and thereby the laying of the ground for recovery of the claim by way of compulsory enforcement. The step may be carried out by taking actual possession of the property, or it may be applied in the form of an annotation of attachment being entered in the relevant registers and records.
The aim is not to destroy the debtor’s assets; what is sought is to bring those assets to a stage at which they are ready to be converted into money and to secure the creditor’s right. In that character, attachment is a necessary but interim stage of compulsory enforcement.
The fact that the proceedings have become final does not of itself confer on the enforcement office the power to act. An attachment is carried out only where there is a duly made and express request from the creditor. Nor is the creditor’s ability to make that request conditional upon the debtor having made a declaration of assets.
The Principal Provisions of the Enforcement and Bankruptcy Act
The provisions on attachment are found in Article 78 et seq. of the Enforcement and Bankruptcy Act No. 2004. Under Art. 78(2), the period afforded to the creditor is one year running from service of the payment order on the debtor; if no attachment is requested within that period, the file is struck off.
The striking off of the file should not be confused with the setting aside of the proceedings. So long as the claim has not become time-barred, the file may be renewed and an attachment requested again, and that possibility is expressly preserved in Art. 78(5).
If the debtor has objected to the proceedings, the period elapsing until the decision setting aside or lifting the objection becomes final is not taken into account in the calculation of the one-year period (Art. 78(2)).
The request may be submitted in writing to the enforcement office conducting the proceedings, or it may be made orally; where it is made orally, the enforcement directorate must record it in the minutes. The creditor must also pay the fees and expenses necessary for the attachment to be carried out.
As regards jurisdiction, the rule is that an enforcement office may act only in respect of assets within its own territorial area. As regards property of the debtor situated within the area of another office, the attachment is applied by writing a letter of request to that office (Art. 79).
In the case of wage and salary claims, by contrast, the location of the asset is not decisive. In claims of that nature, a writ of attachment may be addressed directly to the employer who employs the debtor (Art. 83).
Types of Attachment
Attachment is classified according to the stage of the proceedings at which it is applied and the legal ground on which it rests. Those most frequently encountered in practice are final attachment and preliminary attachment.
Final Attachment
The type applied to the debtor’s assets upon the creditor’s request once the proceedings have become final is termed final attachment. The distinguishing feature of this attachment is that it allows the stage of conversion into money to be reached directly.
Under Article 78 of the Enforcement and Bankruptcy Act No. 2004, once the payment order has been served and the proceedings have become final, the creditor acquires the right to request an attachment within a period of one year. A final attachment is applied by the enforcement office upon that request. Even where the proceedings have become final, the enforcement office has no power to impose an attachment of its own motion.
Property subject to a final attachment is converted into money upon a request for sale, and the creditor is satisfied out of the proceeds of that sale. Final attachment thus corresponds to the stage at which the proceedings are capable of producing an actual result.
Preliminary Attachment
Preliminary attachment is a protective measure of a provisional character to which recourse is had, in the absence of any proceedings that have become final, where a possibility arises that the claim may be placed at risk.
The provisions governing the institution are Article 257 et seq. of the Enforcement and Bankruptcy Act No. 2004. Within the framework of Art. 257, the following principles apply as regards monetary claims:
- if the claim has fallen due, or if it has not fallen due but the debtor’s place of residence is unknown or there are indications that the debtor has attempted to conceal assets, the creditor may apply to the court and request a preliminary attachment order.
- the authority granting the order is not the enforcement office but the court. The order given provisionally ties the debtor’s property for the benefit of the creditor; it does not, however, of itself permit the property to be sold and converted into money. Once the order has been applied, the creditor must commence the substantive proceedings within 7 days, that is to say, send a payment order; otherwise the preliminary attachment becomes ineffective.
For further detail, reference may be made to the note entitled What Is Preliminary Attachment? Conditions and Consequences.
Distinctions Between the Two Types of Attachment
The points distinguishing final attachment from preliminary attachment may be summarised as follows:
- The deciding authority: a preliminary attachment is ordered by the court; a final attachment is applied by the enforcement office upon the creditor’s request.
- The moment of application: a preliminary attachment may arise both before proceedings are commenced and while they are pending; a final attachment is possible only once the proceedings have become final.
- Its character: a preliminary attachment is a provisional protective measure; a final attachment is an operative act of enforcement permitting the property to be sold.
- Its effect: a preliminary attachment does not confer the power to sell; a final attachment makes it possible to proceed to the stage of sale and distribution.
These distinctions make it essential that the type of attachment be correctly identified in the particular case and that the legal route to be followed be determined accurately.
Property and Rights That May Form the Subject of an Attachment
As a rule, all property, rights and claims within the debtor’s assets that are capable of being converted into money may form the subject of an attachment. Which assets may be attached is nevertheless determined in detail in the Enforcement and Bankruptcy Act No. 2004, and certain elements of a person’s assets have been taken outside that scope in whole or in part.
The general position is that assets are attachable. The property and rights kept outside attachment are listed one by one in the Act and are exceptional in character.
Attachment over Movables
The debtor’s movable property may be attached within the scope of Article 85 of the Enforcement and Bankruptcy Act No. 2004. That attachment is carried out by taking actual possession of property under the debtor’s physical control, and the step is documented by a record of attachment.
For an attachment over movables it is sufficient that ownership of the property rests with the debtor; the fact that the item is in the debtor’s hands creates, in practice, a presumption of ownership. Since that presumption is not conclusive, third parties may assert the contrary by way of an action asserting title.
The movable to be attached must have an economic value and be capable of being converted into money. The attachment of property that has no value at all, or that plainly would not even cover the costs of sale, is regarded as incompatible with the principle of proportionality.
Attachment over Immovables
Immovables registered in the debtor’s name likewise form the subject of an attachment. Attachment over an immovable is effected by entering an annotation of attachment in the land registry; this matter is governed by Art. 91 of the Enforcement and Bankruptcy Act.
For an attachment it is sufficient that the immovable be registered in the land registry in the debtor’s name. With the entry of the annotation the debtor’s power of disposal is narrowed; ownership, by contrast, continues to rest with the debtor. The transfer of an attached immovable to third parties is not prevented, but the attachment continues to produce effects against the third parties acquiring the immovable as well.
One of the debates that stands out in attachments over immovables is the defence that the property is the debtor’s dwelling. The sole dwelling meeting the family’s housing needs is subject to restrictions within the framework of the conditions laid down in the Act. This matter requires separate assessment.
Attachment of Claims and Rights
The debtor’s claims against third parties and the various rights they hold may also be attached. Rental income, deposits in bank accounts, commercial claims, wage and salary claims and income arising from intellectual property rights may be counted within that scope.
The attachment of claims and rights is effected under Art. 89 of the Enforcement and Bankruptcy Act by service of a notice of attachment on the third party. By that notice the third party is warned not to make payment to the debtor and to pay what it owes into the enforcement office.
In the case of wage and salary claims, Art. 83 comes into play. Under that provision the debtor’s salary may be attached only within the proportions laid down in the Act. In claims of that nature the attachment is applied by a writ of attachment addressed to the debtor’s employer.
Assets Held by Third Parties
Assets that belong to the debtor but are held by third parties may also be attached. What is decisive in attachments of this kind is not in whose hands the property actually is but to whom it belongs in law.
Such attachments are for the most part conducted within the scope of Art. 89 of the Enforcement and Bankruptcy Act and arise where the third party owes a debt to the debtor or holds property belonging to the debtor. If the third party does not object to the notice of attachment within the period, it may face serious consequences, such as being deemed to have acknowledged its debt to the debtor.
Property and Rights Kept Outside Attachment
The general rule is that all property and rights within the debtor’s assets are attachable. Certain assets have nevertheless been kept outside attachment in whole or in part, so that the debtor and their family may lead a life worthy of human dignity, so that their basic needs are protected and so that social balance is observed.
The provisions on these exceptions are set out in Articles 82 and 83 of the Enforcement and Bankruptcy Act No. 2004.
Absolute Exemption from Attachment under Art. 82
Article 82 of the Enforcement and Bankruptcy Act No. 2004 provides that certain assets indispensable to the debtor’s ability to sustain their economic and social existence may not be attached in any circumstances. Exemption from attachment in such cases retains its validity even where the debtor consents.
The principal property and rights falling outside attachment under Art. 82 of the Enforcement and Bankruptcy Act are the following:
- the personal effects of family members sharing the same dwelling as the debtor and all household goods set aside for the common use of the family; valuables such as gold, silver, money, negotiable instruments, precious stones, antiques and ornaments, by contrast, fall outside the protection;
- the tools, implements and equipment essential to the debtor’s ability to continue in their profession;
- the animals constituting the family’s means of subsistence and the feed belonging to them;
- the family’s two months’ food and fuel requirements;
- aid and social payments granted by the State whose attachment is prohibited by law;
- subject to the exceptions in the Act, the debtor’s sole dwelling befitting their circumstances.
Attachments placed on these assets are regarded as unlawful attachments and may be lifted by way of complaint.
For further information, reference may be made to the note entitled Property That May Not Be Attached (Art. 82 of the Enforcement and Bankruptcy Act).
Assets That May Be Partly Attached
Some property and rights have not been kept entirely outside attachment; only the attachment of a given portion of them is permitted. The aim here is to strike a balance between the creditor’s right of recovery and the debtor’s need for minimum subsistence.
Within that framework, in particular,
- income of every kind, together with wages, salary and daily pay,
- retirement pensions (in respect of maintenance, SGK premium debts or, provided that the debtor consents, other claims)
are as a rule treated as attachable under Art. 83 of the Enforcement and Bankruptcy Act, but the portion sufficient for the debtor’s subsistence must be kept outside the attachment. The upper limit of a salary that may be attached is one quarter; maintenance claims are not subject to that restriction.
Raising a Claim of Exemption from Attachment
The debtor may raise a claim of exemption from attachment during the attachment itself, or may put it forward after the step has been taken. The claim is raised by applying to the enforcement directorate or by lodging a complaint directly with the enforcement court.
That claim is as a rule limited in time. The debtor must take the route of complaint within the statutory period running from the moment they learn of the attachment; otherwise the attachment becomes final and it may no longer be possible to raise the claim afterwards.
It is nevertheless accepted that in cases of absolute exemption from attachment a complaint may be lodged at any time. That approach has become settled both in practice and in the case law of the Court of Cassation.
Property of Third Parties and the Claim of Title
An attachment is as a rule applied to assets belonging to the debtor. It is nevertheless a frequent occurrence in practice that ownership of an item under the debtor’s physical control in fact belongs to third parties. The institution of the claim of title has been provided for in order to protect the ownership rights of third parties.
The method to be applied in that situation and the remedies available are set out in detail in Article 96 et seq. of the Enforcement and Bankruptcy Act No. 2004.
For details on the subject, reference may be made to the note entitled Action Asserting Title.
The Separation of Possession from Ownership
At the moment of attachment, the question of who owns the property is for the most part determined by reference to possession. The fact that the item is in the debtor’s hands at the time of the attachment gives rise to a presumption that ownership belongs to them; that presumption may, however, be rebutted.
Possession denotes physical control, ownership legal entitlement. The fact that property is in the debtor’s hands therefore does not necessarily lead to the conclusion that it belongs to the debtor. That distinction becomes particularly apparent in relationships of bailment, loan and lease and in patterns of use among family members.
In practice, the third party’s supporting of its claim of ownership with documentary evidence is decisive for the acceptance of the claim of title.
Raising a Claim of Title
A third party whose property, which it maintains belongs to it, has been attached may raise a claim of title. That claim may be notified orally to the enforcement officer during the attachment, or it may be made after the attachment by written application to the enforcement directorate.
Under Article 96 of the Enforcement and Bankruptcy Act No. 2004, the enforcement officer records the claim in the minutes and notifies the parties. The creditor or the debtor may object to the claim within the period afforded to them. If no objection is made, the claim is deemed accepted and the attachment is lifted.
Since a failure to raise the claim within the period and in due form may prejudice the third party’s ownership right, this stage is of critical importance in practice.
The Hearing of the Action Asserting Title
If the creditor or the debtor objects to the claim, the dispute is resolved by way of an action asserting title. That action is governed by Articles 97 and 97/a of the Enforcement and Bankruptcy Act No. 2004 and is heard before the enforcement court.
The burden of proof rests as a rule with the third party raising the claim. The third party must prove by convincing and cogent evidence that ownership of the attached property rests with it; if it fails to do so, the attachment retains its validity.
If the claim is upheld at the end of the proceedings, the attachment is lifted and the property is returned to the third party.
The Debtor’s Rights and Obligations During the Attachment Process
Although an attachment serves the creditor’s recovery by way of compulsory enforcement, the debtor’s fundamental rights must be protected throughout the process and the step must be conducted in accordance with the law. In this branch of law, attachment is not recognised as an unlimited power; it must be applied within the framework drawn by the Act, with regard to proportionality and lawfulness.
The Powers and Responsibility of the Enforcement Officer
The step is conducted by the enforcement director or the enforcement officer. The officer’s powers are framed by the relevant provisions, foremost among them Articles 79 and 85 of the Enforcement and Bankruptcy Act No. 2004.
The enforcement officer may act only in respect of property and rights that are attachable in character; the officer may not touch assets whose attachment is expressly prohibited. The step must moreover be conducted in a manner that does not prejudice the debtor’s personality rights and does not turn into a disproportionate interference.
The officer must act impartially, record the steps taken in the minutes in due form and not exceed the limits of the attachment. Attachments carried out contrary to the law are reviewed by way of complaint and may give rise to legal liability.
The Rights Afforded to the Debtor
The debtor is not in a passive position during an attachment; they may exercise a number of powers arising from the Act. Within that framework the debtor may examine the record of attachment and have their objections entered in it, raise a claim of exemption from attachment, lodge a complaint with the enforcement court in respect of steps they consider unlawful, and request protection against arbitrary or disproportionate practices.
The debtor is not required to be present during the attachment. The presence of the debtor or their representative at the site may nevertheless be useful for the effective exercise of the rights listed above.
The debtor may not obstruct the enforcement officer in the performance of their duties; the debtor does, on the other hand, retain the right to have recourse to the remedies provided by law in respect of steps they consider unlawful.
Unlawful Attachments
An unlawful attachment arises where a step is taken in respect of assets that the legislation provides may not be attached, or where the attachment is carried out contrary to the rules on jurisdiction, time limits and procedure.
The debtor may lodge a complaint against steps of that kind with the enforcement court under Article 16 of the Enforcement and Bankruptcy Act No. 2004. The period afforded for the application is as a rule seven days, running from the day on which the attachment became known. In cases of absolute exemption from attachment, by contrast, it is accepted that a complaint may be lodged at any time without any condition as to time.
Where the unlawfulness of the attachment is established, the enforcement court orders the attachment to be lifted. Where the debtor suffers loss as a result, liability in damages may moreover arise under the general provisions.
Remedies Available Against an Attachment
Although acts of attachment are administrative in character and are carried out by the organs of enforcement, various remedies are afforded to the debtor and to other interested parties where there is a breach of the law. In enforcement and bankruptcy law these applications proceed essentially through the institution of the complaint and are subject to strict time limits and rules of procedure.
Complaint to the Enforcement Court
Under Article 16 of the Enforcement and Bankruptcy Act No. 2004, a complaint may be lodged with the enforcement court against acts of enforcement offices that are contrary to the law or unsuited to the circumstances of the case. Acts of attachment fall within the scope of that remedy.
The principal situations that may be made the subject of a complaint are the following:
- the attachment having been carried out by an enforcement office lacking jurisdiction;
- assets whose attachment is prohibited by law having been made the subject of an attachment;
- an attachment having been applied that is manifestly disproportionate and incompatible with the principle of proportionality;
- the step having been conducted contrary to the rules of form and procedure.
The application is addressed to the enforcement court to which the enforcement office that took the step is attached. The examination is as a rule conducted on the file; the court may order the attachment to be lifted or corrected, or may dismiss the complaint.
Decisions given where a complaint is upheld are final in character and are as a rule not subject to review on appeal or on points of law.
Applications Subject to Time Limits
The greater part of the remedies against an attachment are limited in time. Under Article 16 of the Enforcement and Bankruptcy Act No. 2004 the period for a complaint is as a rule seven days, and that period begins to run on the date on which the person concerned learns of the step.
If no application is made within the period, the attachment becomes final and no complaint may afterwards be made against the step. It is therefore of great importance that time limits be monitored meticulously in attachment files.
By contrast, in cases of exemption from attachment other than exceptional situations such as the debtor’s dwelling or a farmer’s implements, no time limit runs. It is accepted that the debtor or the third parties concerned may lodge a complaint at any time in respect of attachments placed on assets whose attachment is expressly prohibited by law. It is advisable to obtain legal support on this point so that no rights are lost.
Independent Legal Assessment
In attachment files the factor determining the outcome is for the most part not the substantive argument but the management of procedure and time limits. Missing the seven-day complaint period, failing to have an objection entered in the record of attachment or failing to raise a claim of title in time can cause even a party who is right in substance to lose their rights. Before attending at the site of an attachment, the file should therefore be examined as a whole and the possible points of objection identified in advance.
On the creditor’s side, observing the balance of proportionality is important. The attachment of property that would not cover the costs of sale, or claims directed at assets falling within the scope of exemption from attachment, not only prolong the process but may also give rise to liability in damages. The following headings stand out in practice:
- entering in the diary the one-year period for requesting an attachment, which runs from service of the payment order;
- applying correctly, in salary attachments, the one-quarter limit and the exception relating to maintenance claims;
- preparing the claim that the property is the debtor’s dwelling together with an assessment of whether the dwelling befits the debtor’s circumstances;
- objecting within the period to notices of attachment sent to third parties and framing the content of the objection with care;
- submitting to the file at the outset the invoices, contracts and records evidencing ownership in a claim of title;
- distinguishing cases of absolute exemption from attachment from cases of exemption subject to a time limit.
Independent Legal provides advisory services and conducts litigation at every stage of the process, from the commencement of enforcement proceedings to the application of an attachment and the conduct of remedies against it.