A German city could face court action after local authorities impounded a pug from an indebted family and put her up for sale on eBay.

The pug formerly named Edda was seized late last year by Ahlen local officials — north of Cologne — from a family which had been unable to pay their debts — including a dog tax — to the city authorities.

A city employee put her on eBay using a private account and sold it for 690 euros ($A1103), with the proceeds going to city coffers.

In the advert, the pooch was described as healthy, vaccinated and dewormed, but the buyer, Michaela Jordan, said the animal suffers from multiple problems including an eye injury that would require an operation.

Ms Jordan, who renamed the pug Wilma, told national news agency DPA she had filed a case against Ahlen city authorities for “fraud”.

“It was all lies,” she said, adding that her lawyer had filed the lawsuit against city authorities on Thursday last week.

She is seeking compensation from the city for the cost of the dog as well as an additional $A2878 for money she spent on Edda’s treatment.

The unusual case has gripped pet-loving Germany.

On the weekend, a spokeswoman from North Rhine-Westphalia state’s interior ministry said that while animals can be seized to pay off their owners’ debts, house pets are essentially exempt.

She also noted that impounded items should be publicly auctioned and not simply sold on eBay through a private account.

Amid the howls of outrage, Ahlen city authorities said on their website that they were ready to reverse the sale “if the parties involved are in agreement”.

German Animal Welfare Federation spokesman Lea Schmitz told ABC News “animals are not objects, they are living beings and anchored in their families, in their homes.

“Dogs bind themselves particularly strong to their owners and often suffer when they lose their homes.”