Once insolvency proceedings have been filed with the insolvency court and all creditors have agreed, the creditors want to be paid out of the debtor's insolvency estate. In other words, the creditors want to get their money somehow.
During the insolvency proceedings, the insolvency court determines what assets the debtor still has to pay the creditors. It establishes whether the debtor has, for example, securities, stocks, real estate, valuable cars, antique jewelry, valuable jewelry, foreign accounts, paintings or other assets. If the debtor has real estate, valuable cars or other assets in the insolvency estate, the creditors have to be paid from them so that the debtor becomes debt-free and can show creditworthiness again. The valuable items then go to the insolvency auction, or foreclosure auction. An insolvency auction is of course only approved after it has been determined whether the creditors can be paid from the debtor's assets. A date is then set for when the auction will take place.

How does a foreclosure auction work as part of an insolvency auction?

The difference between a foreclosure auction in the classic sense and an insolvency auction is that in an insolvency auction the debtor's assets come from the insolvency estate and are sold at a forced auction within that framework. The debtor cannot keep any money from this auction but must pay their creditors in order to become debt-free.
The local court (in Germany, the Amtsgericht) appoints an appraiser to estimate the debtor's assets and prepare a so-called market value appraisal for the upcoming foreclosure auction in favor of the creditors. On that basis the court sets the auction of the debtor's assets.
The debtor should let the appraiser into their premises at an agreed time so the market value appraisal of their assets can be carried out.
The debtor is not obliged to let the appraiser into their home, but must give them access to their property. However, refusing would mean the appraiser cannot do their work for the creditors, which would also put the debtor at a disadvantage. The foreclosure auction in favor of the creditors could not take place in a way that satisfies everyone involved. The debtor should always cooperate so as not to jeopardize the foreclosure auction for the creditors; that would serve no one, least of all the debtor.

Insolvency auction

What does a foreclosure auction mean for the debtor and the creditor?

First and foremost, the creditor is supposed to get their money back from the debtor.
The debtor is supposed to regain their creditworthiness. The creditor receives the entire proceeds of the auction. A foreclosure auction in which the creditor is to be paid always goes through the justice system. It is always public, and anyone aged 18 or over can bid. Whether cars, real estate or valuable jewelry, foreclosure auctions always require that the creditor holds an enforceable title against the debtor.