Over-indebtedness: personal reinstatement with judicial liquidation

Verified 07 January 2025 - Directorate for Legal and Administrative Information (Prime Minister)

Personal recovery without judicial liquidation is a procedure which aims to wipe out the debts of an over-indebted person. It's said with compulsory liquidation when it involves the sale of certain assets of over-indebtedness. It is proposed by the Debt Relief Commission. We'll explain.

The Debt Relief Commission proposes this procedure for over-indebted when in the following situation:

  • Its financial situation is irredeemably compromised, i.e. none of the measures to deal with over-indebtedness (conventional plan or measures imposed) could not improve it.
  • The over-indebted person (or, in some cases, his or her spouse) owns property (valuable real estate or movable property of no particular use in everyday life) the sale of which could repay at least some of the debts.

The over-indebtedness commission calls for over-indebtedness. He may accept or refuse personal recovery with judicial liquidation:

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Over-indebtedness accepts

When the commission for over-indebtedness obtains the written agreement of the over-indebted for a personal recovery with judicial liquidation, it brings before the judge of the protection litigation so that opening hearing be organized.

The commission informs the over-indebted and its creditors that the case is before the judge.

At least 1 month before the date of the opening hearing, the over-indebted party shall be summoned by registered letter with acknowledgement of receipt, and by simple letter.

At least 1 month before the date of the opening hearing creditors shall be summoned by registered letter with acknowledgement of receipt.

Over-indebtedness refuses

Without the agreement of the over-indebted party, the commission cannot initiate the personal recovery procedure with judicial liquidation.

If the over-indebted person refuses this procedure or fails to appear for the meeting of the over-indebtedness committee, the committee shall continue to seek a solution to the over-indebtedness (conventional recovery plan or measures imposed).

At the opening hearing, the protection litigation judge shall hear the over-indebted, its creditors and possibly the social worker who follows the debt overhang.

The judge assesses the situation irredeemably compromised and the good faith over-indebted.

If he finds that these two conditions are met, the court orders the opening of proceedings.

The opening judgment shall be published in the Bodacc: titleContent to allow unadvised creditors to report their debts.

The judge may appoint a representative to get him to do a social survey.

The opening judgment shall have the effect of, until the judgment closing the proceedings:

Reminder

The over-indebted party and its creditors may challenge the outcome of the trustee's social investigation. Such a challenge must be addressed to the court registry, by registered letter with a request for a notice of receipt, no later than 15 days before the liquidation hearing.

The Registry of the Court of First Instance shall convene the over-indebted and creditors at the hearing of the judgment of liquidation.

At that hearing, the judge shall rule on any disputes relating to the social investigation drawn up by the representative and shall fix the amount of the claims.

It may then:

  • Order the judicial liquidation of the assets of the over-indebted person and appoint a liquidator responsible for the amicable or forced sale of the assets of the over-indebted person within 12 months
  • Declare the proceedings closed for insufficient assets (if no goods can be sold)
  • Either draw up the plan (measures imposed) proposed by the trustee, if the judge considers that bankruptcy can be avoided.

This judgment may be challenged on appeal.

The liquidator shall draw up a plan for the distribution of the amount of the sale among the various creditors.

Creditors may contest this allocation within 15 days of the notification project. To do so, they must send their dispute and supporting documents to the liquidator by registered letter with request for notice of receipt.

If the project is not contested (or if objections are received out of time), the judge counterpart the draft allocation. The liquidator then proceeds with the sale of the property.

FYI  

Certain goods cannot be sold. These include goods that are necessary for everyday life, goods that have no market value and whose selling costs are disproportionate to their selling price, and non-professional goods that are essential for working (for example, cars or computers).

At the end of the sale of the property, the judge shall make a final judgment.

When the sale of the assets has cleared all the debts, it is a closing judgment for extinguishment of liabilities.

In all other cases, it's a closing judgment for insufficient assets.

The effects of personal reinstatement with judicial winding-up are as follows:

  • erasure of all professional and non-professional debts (fixed at the date of the judge's decision) of over-indebtedness, except debts paid by the surety of over-indebtedness if the guarantor is an individual, maintenance debts (in particular maintenance), fines, damages allocated to a victim, debts arising from a pawnbroker, fraudulent debts to a social organization (for example, undue payment to the Cfa)
  • Recording of over-indebted in Personal Credit Reimbursement Incident File (PPIF) for five years.

Please note

The forgiveness of a debt from an unpaid check is tantamount to regularization, i.e. the right to use your checkbook again.

In case of debt for unpaid rent or expenses, the judge of the lease may grant the tenant, under certain conditions, a period for repaying this lease debt (maximum 3 years).

Where the judgment of closure comes after the decision of the judge of the lease, the cancelation of the rental debt provided for by the personal restoration with judicial liquidation replaces the period of payment granted by the judge of the lease, and the effects of the rescission clause shall be suspended for the following 2 years.

If the over-indebted person pays the rent and expenses during these two years, the cancelation clause must be considered as not being activated. Otherwise, the effects of the rescission clause shall resume.

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