Risks and legal situations

Insolvency (insolvence)

In Czech: Insolvence

Insolvency (insolvence) is a situation in which a debtor cannot meet their obligations. During insolvency proceedings the debtor must refrain from significant dealings with their assets, so selling their property follows special rules.

Also called: insolvence, bankruptcy, insolvency proceedings, úpadek

What it means

Insolvency (insolvence) means that a debtor, a person or a company, cannot meet their monetary obligations. A court deals with it in insolvency proceedings and decides how the creditors will be paid from the debtor's assets. For individuals, a common outcome is debt relief (oddlužení).

In property deals, insolvency matters mainly when the seller is affected. Their assets, the insolvency estate (majetková podstata), serve to satisfy the creditors, so the debtor cannot handle them freely.

How it works in the Czech Republic

From the moment insolvency proceedings take effect, the debtor must refrain from dealing with the insolvency estate if it would substantially change its composition, use or purpose, or reduce it by more than a negligible amount. Acts that breach this restriction are ineffective towards the creditors (§ 111 of the Czech Insolvency Act, insolvenční zákon).

Ineffective is not the same as invalid: the contract may still exist between the parties, but the creditors can treat the property as if it had never been transferred. For a buyer this can cause serious complications, including losing the property.

The insolvency register (insolvenční rejstřík) is a public information system run by the Ministry of Justice. Anyone can search it at isir.justice.cz and make copies and extracts, using the seller's name and date of birth, birth number or company ID (IČO).

Practical example

For example, a seller offers a weekend cottage for CZK 2.5 million (illustrative amount). Just before signing, the buyer checks the seller in the insolvency register and finds that proceedings have been opened against him. The buyer postpones signing and asks a lawyer whether a sale is possible at this stage at all, and who decides about it.

What to watch out for

  • Check the seller in the insolvency register before the reservation and again just before signing.
  • Check co-owners too, and for companies both the company and its directors.
  • If the seller is insolvent, do not deal only with them; find out who decides about the assets in the proceedings.
  • Pay the purchase price into escrow (úschova), not directly to the seller.
  • If anything is unclear, speak to a lawyer before paying anything.

Frequently asked questions

How do I find out whether a seller is insolvent?

Search for them in the insolvency register at isir.justice.cz. Anyone can look and make an extract.

Is a contract with an insolvent seller invalid?

The Insolvency Act speaks of acts being ineffective towards creditors rather than invalid. For a buyer the consequences can still be just as serious.

How is insolvency different from exekuce?

Exekuce recovers a specific debt through a bailiff, while insolvency deals with the debtor's whole situation towards all creditors before a court.

  • Enforcement against a property (exekuce)Enforcement against a property (exekuce) is the forced recovery of a debt in which a court bailiff targets the debtor's house, flat or land. Once it starts, the owner may not freely dispose of the property, and it may be sold.
  • Property auction (dražba)A property auction (dražba) is a legally regulated public sale in which the highest bid wins the property. It can be held, for example, as a public auction under the Public Auctions Act or as an auction within enforcement proceedings.
  • Title deed (list vlastnictví)A title deed (list vlastnictví, LV) is the land register sheet that shows, for one cadastral area, who owns which properties and what burdens them, such as mortgages, easements or a pending change of ownership.
  • Purchase agreement (kupní smlouva)A purchase agreement (kupní smlouva) is the written contract in which the seller undertakes to transfer ownership of a property to the buyer and the buyer undertakes to pay the price. Ownership passes only on entry into the land register.
  • Lien (zástavní právo)A lien (zástavní právo) secures a debt: if the debtor does not pay, the creditor can be satisfied from the pledged property. On a property in the land register it arises by entry and stays with the property when it changes hands.

Sources

Laws and official pages this text is based on (in Czech).

This text is for information only and has not yet been checked by a legal or financial expert. It is not legal, tax or financial advice. Verify important details in the listed sources or with a professional.

Updated 25 October 2026

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