An intangible asset is an asset that does not have any material existence. It is an indefinable item of property (e.g. a sum of money).

In Luxembourg, there are two ways in which intangible assets can be seized.

• (I) Garnishment under ordinary law
• (II) Attachment of earnings (wages, rent, pensions)
• Glossary

Garnishment under ordinary law

Garnishment is an action by which a creditor (the garnishment creditor) freezes money which belongs to the debtor (the garnishment debtor), and which is held by a third party (the garnishee). The creditor then takes delivery of these sums up to the amount the debtor owes.

In other words, the action makes it possible for the obligation (concerning a sum of money), which the debtor (garnishment debtor) has over another debtor (the garnishee), to be assigned to the creditor.

Definition

Garnishment is an action by which a creditor (the garnishment creditor) freezes money which belongs to the debtor (the garnishment debtor), and which is held by a third party (the garnishee). The creditor then takes delivery of these sums up to the amount the debtor owes.

Conditions

An application for a garnishment must meet the following conditions:

• the creditor must hold a public or private document of entitlement or an authorisation to seize assets granted by way of an ex parte order; and
• the creditor's debtor (the garnishment debtor) must be a creditor of a third party (the garnishee).

The seizure

The seizure takes place by serving a garnishee nisi on the garnishee who is then bound not to dispose of any sums owed or which will be owed to the garnishment debtor.

The debtor is then given formal notice of the garnishment, specifically to enable the debtor to defend the action. This document will also contain a declaration of validation of the garnishment.

This notice of a garnishment will then be served on the garnishee (third party notice).

Once these formalities have been complied with, the garnishee will make the payment. How the payment is made will depend on whether or not an objection is made.

The effects

The garnishment has the effect of immediately allocating the sum to the garnishment creditor who therefore takes precedence over any future creditors' arrangement.

Furthermore, the garnishment means that the sums seized cannot be disposed of, and they cannot be used to make any other payment.

This garnishment procedure comes under the provisions of Articles 693 to 718 of the New Civil Procedure Code.

1. Conditions

The garnishment creditor must hold a public or private document of entitlement. In default, the creditor may seek permission to garnish from the competent court. This is done by way of an ex parte application.

The garnishment debtor must be a creditor of a third party (the garnishee).

The garnishee must be a debtor of the garnishment debtor. Garnishees must be bound by an obligation concerning a sum of money towards the garnishment debtor, and they must hold sums due to the garnishment debtor in their own right (bankers, legal representatives of those under a disability or minors, a notary, a lawyer).

It is necessary to distinguish two different types of debts in relation to garnishment proceedings:

• the debt giving rise to the garnishment: this is the garnishment creditor's entitlement against the garnishment debtor. It is therefore the sum which the debtor owes the creditor. This entitlement must be for a fixed amount.
• the debt which is the subject of the garnishment: this is the garnishment debtor's entitlement against the garnishee. It is therefore the sum which the garnishee owes the garnishment debtor. The garnishment debt must be an entitlement to a sum of money (but it cannot be remuneration for work, as this is governed by a different type of seizure). It does not need to be recorded in an enforcement order. Moreover, it is not necessary for the entitlement to be for a fixed amount or immediately payable.

The entitlement must exist at the time of the seizure. It must be part of the garnishment debtor's assets.

In addition, it should be noted that a procedure for self-garnishment exists, which makes it possible for garnishment creditors to garnish sums which they owe to the garnishment debtor.

2. Procedure

Garnishee nisi

The garnishee nisi is a document from the judicial officer served on the garnishee. If it does not contain the following information it will be invalid:

• a statement of entitlement
• a copy of the permission, if the garnishment is made on the basis of the permission of the court
• the sum for which the garnishment is made
• the creditor's election of address in the place where the garnishee resides.

Furthermore, the garnishment shall contain a statement that the garnishee is personally liable to the garnishment creditor, and that the garnishee is prohibited from disposing of the sums claimed up to the amount owed to the debtor.

Once the garnishee nisi is served the garnished debt cannot be disposed of. As a result, no payment can be made from the garnished amounts.

Furthermore, this restriction prevents the garnishee from making a payment out of the garnished sums to the garnishment debtor. Consequently, breach of this restriction will result in the garnishee having to make another payment to the garnishment creditor. The garnishee will simply be declared a debtor.

The notice of garnishment served on the debtor

The purpose of this notice is to inform the debtor of the measure so as to enable the debtor to file a defence.

Within seven days of service, the garnishee nisi shall be served on the debtor by a judicial officer. If service is not effected within this period of seven days the garnishee nisi will lapse.

Service of the notice is effected on the initiative of the creditor, and it will contain a declaration of validation of the garnishment. There are two aspects to this process:

• the order for payment of the debt giving rise to the garnishment
• a declaration of the validity of the garnishment on the basis of this order

Where the garnishment is made on the basis of an enforcement order, the process only entails the declaration of validity.

Service of the third party notice on the garnishee

Within a maximum period of seven days from service of the garnishment notice on the debtor, the garnishee will be served with the notice. Failure to serve the third party notice on the garnishee within this period will mean that any payments made by the garnishee shall be valid until service is effected.

The positive or negative declaration by the garnishee

After the garnishee nisi has been validated by a court judgment, the garnishee can be served with the notice and then the proceeds can be distributed proportionately.

In the event of non-service, the garnishee will be declared a debtor for the amounts giving rise to the garnishment.

Attachment of earnings

Attachment of earnings is a procedure that enables the creditor to seize "at source" the sums owed to the debtor.

Definition

This procedure enables the creditor to seize sums of money owed by the debtor directly from the debtor's employer.

The seizure

This procedure only applies to wages. It only applies to the attachable portion of the wages.

The court manager will notify the employer of the attachment. The debtor then receives of copy of this notice.

The employer is then obliged to pay the deductions covered by the attachment every month. These sums are paid directly to the creditor.

The attachment of earnings procedure is governed by the Law of 11 November 1970 on assignments, attachments of earnings, pensions and rents.

1. The scope of the attachment of earnings procedure

Under Article 1 of the Act, the attachment applies "... generally to all sums due as wages to any employed persons and to those in work, irrespective of their capacity or location, for one or more employers, regardless of the amount and nature of their earnings, the form and nature of their contract or their status."

The income of any persons exercising a profession or receiving royalties are therefore excluded.

Under this procedure, the attached sums must be wages. The actual wages are attachable, as are other emoluments (benefits in kind, overtime etc.).

The debtor's entire wages can be attached. Article 5 makes provision for the attachable portions of the wages.

2. Procedure

The creditor submits an application for an attachment of earnings before the competent court. The competent court is the small claims court. It has exclusive jurisdiction.

Normally the competent court will be the one for the attached debtor's residence. If the debtor lives abroad, but works in Luxembourg, the Act gives jurisdiction to the small claims court for the address of the attached third party.

An attachment of earnings can be made on the basis of a public or private document of entitlement or on the basis of an enforcement order.

Notice of the order authorising an attachment of earnings is served by the court manager on the attached third party, and this notice counts as the attachment of earnings order.

The court manager will inform the debtor and the creditor in writing that the order authorising the attachment of earnings has been served.

The employer is obliged to provide an affirmative or negative declaration (depending on the employer's situation vis-à-vis the employee) within a period of seven days of service. In default of such a declaration, the employer is simply declared to be subject to the attachment.

It is important to note that, before being able to receive payment of all or part of the attached sums, the attaching creditor must assess whether the attachment of earnings sought is properly founded and valid, and set out the exact amount of the debt against the attached part.

More than one creditor

The court will divide the attached sums among the different applicants.

Glossary

• Adjudication (auction): a process whereby a seized asset is sold at public auction to the highest bidder.
• Avis à tiers détenteur (notice to a third party holder): a procedure that enables the Public Treasury to appropriate sums of money which taxpayers are owed by third parties.
• Caducité (lapsing): a sanction against a measure that was initially valid, but the effectiveness of which was dependent on a subsequent event which was lacking.
• Droits d'associés (partners' shares): shares issued by civil law and commercial partnerships, other than limited companies.
• Effet attributif (attributive effect): the effect of allocating a right to a person.
• Effet translatif (transfer effect): the effect of passing one owner's right on to another.
• Indisponibilité (inability to dispose of property): state in which a person is unable to dispose of his/her assets or an item of property.
• Mainlevée (release): removal of a restraint, or an obstacle to the right to perform an act or to exercise a right.
• Nantissement (pledge): valuable security to guarantee an intangible right.
• Notification (notice): act of making a person aware of a measure, either through a judicial officer (service) or by post.
• Nullité (invalidity): sanction against a legal measure that has a formal defect (e.g. (e.g. breach of a formal requirement) or a substantive defect (e.g. lack of capacity to be a party to legal proceedings).
• Part sociale (share): a share in the capital of an entity, ownership of which confers the capacity of shareholder or member and therefore the right to participate in the life of the company and to have a share of the profits.
• Prescription (prescription): means by which a right is acquired or extinguished through the passage of a certain period of time.
• Prix de la course (order of payment of creditors): here this means the priority order of enforcement creditors ("first come, first served").
• Régisseur (administrator): a person who administers or manages.
• Séquestre (sequestration): placing a disputed item in the possession of another party until legal proceedings have been finalised.
• Signification (service): providing notice through a judicial officer by handing a court document over to the intended recipient.
• Subrogation (subrogation): opportunity presented to a creditor in enforcement proceedings to substitute another, negligent creditor.
• Terme à échoir: payable in advance
• Terme échu: payable at the start of the following month.
• Valeurs mobilières (transferable securities): shares issued by public or private legal entities, which, by virtue of their origin, can be quoted on the stock market.