Mokpo Legal Consultation | Assisting the Client to Obtain a Decision to Commence Compulsory Auction of the Debtor's Real Estate

A compulsory real estate auction is a procedure in which, if a debtor fails to repay a debt, the creditor obtains the court's assistance to compulsorily place the debtor's real estate up for 🔗auction and to be repaid from the proceeds.

The general procedure for a compulsory real estate auction is as follows.

1. Securing a title of execution
Before a creditor can apply for a compulsory auction, the creditor must first secure a title of execution (for example, a final judgment or a notarial deed).
A title of execution is a document that clearly establishes the debtor's legal obligation to pay a specific amount.

2. Application for the auction
The creditor must apply for the compulsory auction with the competent court.
At the time of application, the creditor submits the certified copy of the real estate register, the title of execution, the amount of the claim, and similar materials.

3. Investigation and appraisal of the real estate
The court investigates the condition and value of the real estate and determines its market value through an expert appraisal. This is used to set the starting auction price (the minimum bid price).

4. Public notice of the auction
The court publicly announces the auction schedule and conditions. The auction notice is generally disclosed through the court's auction system, the internet, and similar channels.

5. Conduct of the auction
The auction proceeds with bidding according to the schedule set by the court.
The final successful bidder pays the bid price and has ownership transferred.

6. Distribution procedure
Once the auction proceeds are secured, the court distributes them among the creditors.
The distribution is divided according to the priority of the creditors (security holders, lessees, and others), and any remaining amount is returned to the debtor.

7. Loss of the debtor's ownership
After the auction is completed, the successful bidder has ownership of the real estate transferred through a court order, and the debtor loses ownership.
In this process, the creditor receives the proceeds from the sale of the real estate through the auction, but if the bid price falls short of the debt amount, the creditor may need to separately pursue collection of the remaining amount.

With the assistance of the attorney, the client obtained an execution clause directing payment of the relevant amount in the construction payment claim lawsuit against the debtor.

The attorney asserted that, in that construction payment lawsuit, a certificate of service and an execution clause based on provisional execution had been granted.

🔗Legal Information on Construction Payment Lawsuits as Explained by the Attorney (Click)

The attorney asserted that, although the debtor had received a judgment in the earlier construction payment claim case ordering payment of approximately 60 million won to the client, the debtor had not repaid any of it, and stated that an application for a compulsory auction of the real estate owned by the debtor was being filed in order to apply the proceeds toward repayment of the above claim.