What is a third-party debtor?

A third-party debtor is a person or company that owes money or another benefit to the debtor. The term comes from the area of garnishment and enforcement proceedings. When someone has debts, there is often a third-party debtor. That is, a person who still owes the debtor money.

In simple terms: the third-party debtor is a third person in the relationship between the creditor and the debtor. They stand between the two and have a legal obligation to the debtor, such as paying wages, transferring rent, or disbursing a balance.

If such a claim is garnished, the third-party debtor may no longer pay the money to the debtor, but only to the creditor. This ensures that the creditor’s outstanding claim is settled.

A typical example is wage garnishment: an employer owes their employee (the debtor) a monthly salary. If this salary is garnished, the employer must transfer the attachable portion directly to the creditor.

Who can be a third-party debtor?

Third-party debtors can be many different types of individuals or organizations. The only thing that matters is that they owe a performance or payment to the debtor. In practice, this can include the following:

Employers who pay wages or salaries to their employees
Banks that manage account or savings balances
Insurance companies that must make a payout to the debtor
Tenants who pay rent to a landlord who is the debtor
Customers who must settle an outstanding invoice with a company

Authorities or pension insurance institutions can also be third-party debtors if they make regular payments to the debtor.

It is important to note that being a third-party debtor does not mean being in debt yourself. It simply means that someone owes money to the debtor and that this money can be redirected to the creditor through garnishment.

When does someone become a third-party debtor?

A person or company does not automatically become a third-party debtor. This only happens once a garnishment has been legally served. This is done through what is called a garnishment and transfer order, issued by an enforcement court or bailiff.

The legal obligation only becomes effective once this order has been served. From that moment on, the third-party debtor may no longer make payments to the debtor. Instead, they must comply with the instructions in the order and may only pay the creditor.

The legal basis for this is found in Section 829 of the German Code of Civil Procedure (ZPO), which sets out when a garnishment of claims becomes effective and how it must be carried out.

For example, if a bailiff serves a garnishment and transfer order on an employer, the employer becomes the third-party debtor at that moment. They must then transfer the attachable portion of the salary to the creditor.

What duties does a third-party debtor have?

Once the garnishment and transfer order is served, specific legal duties arise. These duties are clearly defined in the German Code of Civil Procedure (ZPO). The main obligations are as follows:

Prohibition on payment to the debtor
From the moment the order is served, the third-party debtor may not pay any money to the debtor. Any payment made to the debtor would be invalid and could have legal consequences.
Duty to provide information to the creditor
The third-party debtor must inform the creditor whether and to what extent a debt exists toward the debtor. This is done through what is called a third-party debtor declaration. It specifies whether payments are owed, when they are due, and whether other garnishments exist.
Implementation of the garnishment
If there is an attachable claim, the third-party debtor must pay the corresponding amount to the creditor or to a court-designated entity.
Deposit in case of uncertainty
If there is doubt about who is entitled to receive the money (for example, if there are multiple creditors), the third-party debtor may deposit the amount with the local court. This fulfills their obligation without exposing them to liability.

These duties ensure that the garnishment process runs correctly and that the creditor can enforce their claims.

What rights does a third-party debtor have?

A third-party debtor is not without protection in the garnishment process. The law grants them clear rights to safeguard them from disadvantages.

An important right is the right of deposit under Section 840 (2) ZPO. It allows the third-party debtor to deposit the money with the local court if it is unclear who is entitled to receive payment. This helps them avoid legal risks.

In addition, the third-party debtor may, in certain cases, request reimbursement of costs incurred through handling the garnishment. This may include administrative expenses, correspondence, or accounting work.

If several creditors make claims at the same time, or if the debtor files an opposition, the third-party debtor can also wait until the court decides who is entitled to payment. This prevents double payments or legal exposure.

Where is the role of the third-party debtor defined in law?

The rights and duties of the third-party debtor are clearly defined in the German Code of Civil Procedure (ZPO), particularly in Sections 828 to 840 ZPO.

These sections regulate:

When a garnishment of claims becomes effective
How the garnishment and transfer order is served
What information the third-party debtor must provide
And what protective rights they have in the proceedings

The key provision is Section 840 ZPO, which details the third-party debtor’s duties and rights, including the duty to provide information and the right of deposit.

These legal rules ensure that enforcement proceedings are fair and transparent, allowing all parties (creditor, debtor, and third-party debtor) to clearly understand their rights and obligations.