In finance, the term foreclosure denotes the termination of a loan agreement ahead of schedule by the lender. In a foreclosure, the lender demands full repayment of the loan by the borrower.
Foreclosure normally occurs when a borrower defaults on loan repayments or interest payments, but any breach of a loan agreement may entitle the lender to foreclose. In Switzerland, for example, mortgage lenders may foreclose on a loan if the collateral value ratio becomes insufficient to secure the loan, or if the borrower no longer meets their affordability requirements.
Depending on the jurisdiction and the terms and conditions of the loan agreement, the lender may have the right to seize assets owned by the borrower in order to cover all or part of the debt owed. In Switzerland, creditors have the right to file claims against debtors at municipal debt collection offices. Debtors may dispute claims. If claims are found to be justified, a creditor can seize a portion of the borrower’s income for the repayment of the debt.
In the case of mortgages or other loans which are secured by collateral, the lender has the right to seize the collateral in keeping with the terms and conditions laid out in the loan agreement.
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