Assets, whether personal or professional, are the general pledge of creditors. In theory, this fundamental principle of civil law authorises the seizure of all a debtor's assets to ensure payment of his debts. However, the law and practice have developed sophisticated protection mechanisms to preserve certain essential assets or to organise a patrimonial defence against economic hazards. Inalienability and unseizability are the two pillars of this protection, offering solutions for shielding certain assets from creditors. The complexity of these mechanisms often makes it essential to be assisted by a expert lawyer in enforcement law to secure your assets. The aim of this article is to provide a comprehensive guide to the tools and strategies for making assets inalienable or exempt from seizure.
I. Understanding the inalienability and unseizability of assets: fundamental concepts
Protecting assets from creditors is based on two distinct but complementary legal concepts: inalienability and unseizability. Although they both result in a form of protection for certain assets, they are based on different principles and have different regimes. These exceptions stand in opposition to creditors' general right of pledge, a key principle governed by the legal framework for civil enforcement proceedingsand deserve special attention from the courts.
A. Definition and distinctions: inalienability and unseizability
Inalienability is a restriction on the right of ownership that deprives the holder of the right to dispose of the property, i.e. to sell, give or transfer it. Inalienability may be legal, as in the case of property in the public domain, or, more frequently in private law, voluntary. It is often stipulated in a gratuitous deed, such as a gift or a will, by means of a specific clause.
The purpose of non-seizability is not to limit the owner's right of disposal, but to prevent creditors from taking legal action. Property that has been declared unseizable cannot be seized. The owner retains the right to sell it, but his creditors cannot force the sale in order to pay themselves out of the price. This protection is generally introduced by law in order to preserve human dignity or the continuity of professional activity.
The distinction is essential: an inalienable asset is, by implication, exempt from seizure, as creditors cannot force the sale of an asset that its owner does not have the right to dispose of. However, property that cannot be seized is not necessarily exempt from seizure. For example, the principal residence of a sole trader is exempt from seizure for his business debts, but he remains perfectly free to sell it. The courts are often called upon to rule on complex cases that straddle the boundary between these two concepts.
II. Voluntary asset protection: inalienability clauses and trusts
The law offers a number of tools for voluntarily protecting assets before any financial difficulties arise. Inalienability clauses, which are strictly regulated by the Civil Code, and trusts, a more modern and flexible mechanism, are strategic instruments for protecting certain assets from creditors.
A. Inalienability clauses in gifts: conditions and effects
Article 900-1 of the French Civil Code strictly governs the validity of inalienability clauses in gifts and wills. To be valid, such clauses must meet two cumulative conditions: they must be limited in time (temporary) and justified by a serious and legitimate interest. The temporary nature of the clause means that the prohibition on selling cannot be perpetual; it is often limited to the lifetime of the donor or beneficiary. The courts take great care to ensure that these two conditions are met.
The serious and legitimate interest is assessed by the courts on a case-by-case basis. It may be the wish to keep a building or property in the family, to guarantee a source of income for the beneficiary of the gift by preventing him or her from squandering the capital, or to ensure that the property (donated or bequeathed) will be used for a specific purpose. The case law of the courts confirms that this interest is assessed on the day the clause is stipulated.
Once validly stipulated, the clause renders the property unavailable. It cannot be sold, given away or mortgaged. Consequently, it cannot be seized by the beneficiary's creditors. A fundamental point is that the case law of the Cour de cassation has established that an application for judicial release of the clause (i.e. its removal) is a right exclusively attached to the person of the donee or legatee. Creditors cannot therefore act in his place to have a clause lifted and thus be able to proceed with a seizure. This safeguard is therefore particularly robust, and the courts systematically reject such actions by creditors. An action for release is possible if the interest that justified the clause has disappeared.
B. The trust: a modern instrument for proactive asset protection
A trust, governed by Article 2011 of the Civil Code, is a transaction whereby a person (the settlor) transfers property, rights or security interests to a trustee. The trustee manages these assets for a specific purpose, for the benefit of one or more beneficiaries. One of the major advantages of this mechanism is the creation of a special-purpose asset, distinct and separate from the personal assets of the settlor and the trustee. The contract must be published in order to be enforceable against third parties.
These trust assets are thus protected from action by the settlor's personal creditors. Under article 2025 of the Civil Code, only creditors whose claims arise from the conservation or management of these assets may seize them. Similarly, in the event of insolvency proceedings against the trustee, the trust assets are not affected. The trust can also be used as an effective security (known as a security trust), a complex mechanism that forms part of the wider ecosystem of the securities lawincluding pledges and collateral. This advanced legal technique is increasingly used in complex packages.
Compared with the inalienability clause, the trust offers much greater flexibility. It is not simply a prohibition on disposal, but a genuine tool for active management and dynamic protection of assets. It can be used to organise a transfer, provide security for a loan, or manage complex assets while isolating them from the risks associated with the settlor's personal assets. From a tax point of view, the transfer of assets into the fiduciary estate benefits from a principle of neutrality, avoiding immediate taxation of unrealised capital gains under certain conditions. This is a considerable advantage, recognised by the tax courts.
III. Legal unseizability: assets and income protected by law
In addition to voluntary strategies, the law itself provides for the protection of debtors by declaring that certain income and assets deemed essential to preserve their dignity and enable them to meet their basic needs and those of their family cannot be seized.
A. Unseizability of the debtor's income: an exhaustive list
Income protection is a fundamental principle in guaranteeing debtors a minimum standard of living. Several categories of income are exempt from seizure, in whole or in part, and this is often confirmed by the courts.
As a matter of principle, maintenance claims cannot be seized. This includes maintenance payments, but also compensatory allowance paid following a divorce, which the Court of Cassation considers to be completely exempt from seizure due to its mixed nature, i.e. both maintenance and compensation.
Earnings from work (wages and salaries) are only partially attachable. The Labour Code sets out a progressive scale (the seizable portion) that increases with the level of income. However, a fraction of the salary, equivalent to the amount of the Revenu de Solidarité Active (RSA) for a single person, is always available to the debtor. This sum is considered absolutely unseizable. Income from literary and artistic property is also partially exempt from seizure for maintenance purposes.
Many social benefits are declared by law to be fully or partially exempt from seizure. This is particularly true of the RSA and the Allocation aux Adultes Handicapés (AAH), which are completely exempt from seizure. Other benefits, such as family allowances and daily benefits for accidents at work, are also exempt from seizure, except for the payment of certain specific debts (maintenance debts, canteen fees, etc.). Invalidity and retirement pensions, meanwhile, may be seized within the same limits as wages. The aim of this protection is to ensure that aid intended to compensate for a precarious situation or disability is not misused.
Finally, to guarantee the effectiveness of these protections in the event of a seizure on a bank account, the SBI (Solde Bancaire Insaisissable) mechanism has been introduced. The bank is obliged to automatically make available to the debtor a sum equal to the amount of the RSA, without the debtor having to take any action.
B. Unseizability of movable assets, the entrepreneur and other specific cases
In addition to income, certain movable and immovable assets are protected against seizure.
Article L. 112-2 of the Code of Civil Enforcement Procedures sets out the list of movable property necessary for the life and work of the distrainee and his or her family, which may not be seized. This includes clothing, bedding, kitchen utensils, heating appliances and even work tools needed for the personal exercise of a professional activity (for example, the computer of an unemployed person actively looking for work, as the courts have accepted). There are, however, limits to this protection: it does not apply to the payment of the price of these goods, and high value goods can be seized.
The law of 14 February 2022 radically overhauled the status of sole trader to provide better protection for personal assets. The most emblematic measure is the automatic and automatic separation of their assets into two distinct masses: business assets and personal assets. As a matter of principle, business debts can only be pursued against business assets. This protection, which applies to all individuals practising in their own name from 15 May 2022, renders obsolete the former system of declaration of unseizability (EIRL) for new activities. Protecting the principal residence of the sole trader is one of the most practical applications of unseizability, designed to protect the sole trader from the risk of seizure. protect against foreclosure for his business debts.
Finally, some assets are considered exempt from seizure for reasons of public interest, a category often examined by the courts. Examples include property needed by trade unions for their meetings or cultural property loaned by foreign powers for exhibitions in France.
IV. Interaction with enforcement and over-indebtedness procedures
The mechanisms of inalienability and unseizability are not absolute protections and their effectiveness may be affected or reinforced by the opening of collective proceedings, such as overindebtedness. The enforcement judge (JEX) plays a central role in coordinating these different legal rules, as do all the competent courts.
A. Excessive personal debt and its consequences for asset protection
When an individual finds it manifestly impossible to meet all their non-business debts, they can refer the matter to the over-indebtedness commission. The simple decision by the commission to accept the case automatically suspends and prohibits all enforcement proceedings against the debtor's assets for up to two years. This measure provides a crucial respite for the debtor.
At the end of the procedure, the commission may draw up a recovery plan providing for debt rescheduling, remission or even partial cancellation. In the most compromised situations, a personal recovery procedure may be initiated, leading to the total cancellation of debts. The analysis of the suspension of debt collection and the cancellation of debts, as part of the over-indebtedness proceduresThis is crucial to understanding their impact on assets that have already been declared inalienable or non-seizable.
B. The role of the enforcement judge (jex): powers and limits
The Enforcement Judge is the magistrate responsible for settling difficulties relating to enforceable titles and disputes arising during enforcement. He has the power to order the release of any measure that he deems to be abusive or unnecessary. For example, it can cancel a seizure of an asset that cannot legally be seized. The judicial courts have specialised chambers for these disputes.
However, its powers are limited by the principle of the intangibility of the writ of execution: it cannot call into question the judgment on which the seizure is based. His review focuses on the legality of the execution, not on the substance of the right already judged. A detailed analysis of the jurisdiction and powers of the JEX is essential if you want to understand how it deals with enforcement difficulties and disputes relating to protected assets. It can also grant debtors periods of grace, temporarily suspending proceedings. The decisions of the courts of first instance are subject to appeal.
V. Immunity from execution and specific protection of the home
Certain categories of property or persons benefit from special protection that makes them completely immune from enforcement. These immunities, as well as specific provisions for the protection of housing, reflect the legislature's desire to protect certain higher interests, some of which are governed by international law.
A. Immunity from execution: protection for public entities
By virtue of a general principle of administrative law, assets belonging to public bodies (the State, local authorities and public establishments) cannot be seized. This immunity from execution is justified by the need to guarantee the continuity of the public service and by the presumption that these entities are solvent. Specific procedures for enforced payment exist, but they exclude the seizure of public assets.
Foreign states and international organisations also benefit from immunity from execution for property used for their sovereign missions (embassies, consulates). On the other hand, assets used for commercial or private law activities may, under certain conditions set by the courts, be subject to seizure. The general conditions of immunity from execution protect French and foreign public entities, making a distinction between assets allocated to a public service and those of a commercial nature. A draft law, the content of which could be debated in September 2024, aims to further clarify this system.
B. Protection of housing against eviction and unseizability of the home
The right to housing is an objective with constitutional value, which justifies reinforced protection against eviction. The best known is the "winter truce", which suspends all eviction measures from 1 November to 31 March. The judge can also grant periods of grace, of up to three years, if the evicted person cannot be rehoused under normal conditions.
The eviction procedure itself is strictly regulated, with the Prefect systematically informed to anticipate any rehousing needs. In specific cases, the home may be considered non-seizable, in particular to protect a spouse who has been the victim of violence or when the property is in the public domain. These measures aim to reconcile the landlord's right of ownership with the need to preserve the dignity and stability of the occupants. For accessible, detailed information on each part of the procedure, it is advisable to consult a lawyer.
Asset protection is a complex process that requires in-depth analysis and an appropriate strategy. Whether through contractual clauses, the use of trusts or the application of legal protections, there are solutions to protect your assets. For a full assessment of your situation and the implementation of effective protective measures, do not hesitate to contact our law firm for tailor-made support.
Sources
- Civil Code
- Commercial code
- Code of civil enforcement procedures
- Consumer Code
- French Labour Code
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