When an individual is facing serious financial difficulties, the prospect of having their principal residence seized is a major source of anxiety. If completed, this compulsory execution procedure results in the sale of the property to pay off creditors. However, French law has put in place mechanisms to protect debtors acting in good faith, the most important of which is the procedure for dealing with over-indebtedness among private individuals. Far from being a mere formality, the filing of an over-indebtedness application can have a direct and significant impact on the progress of a property seizure, by causing it to be suspended or the sale to be postponed. Understanding how this works is the first step in a successful defending against foreclosure efficient.
I. The over-indebtedness procedure for private individuals and the seizure of property
Although the foreclosure procedure Although the debt collection process follows a strict chronological sequence, it is profoundly affected by the debtor's personal situation, particularly when overindebtedness proceedings are initiated. The law organises a precise interaction between these two systems to offer a reprieve to the debtor and enable overall management of the debt, temporarily freezing creditors' actions, an effect comparable to the cessation of individual legal proceedings when collective proceedings are opened.
A. Principles of suspension and prohibition of enforcement proceedings
The most immediate protection offered by the filing of an over-indebtedness case is the suspension of individual legal proceedings. As soon as the Commission de surendettement declares the debtor's case admissible, legal protection is put in place. Pursuant to art. L. 722-2 of the Consumer Code, this decision automatically suspends and prohibits all enforcement proceedings against the debtor's assets, including seizure of property. This measure entails the suspension and prohibition of legal proceedings.
This protective measure is temporary and may not exceed two years, as specified in art. L. 722-3 of the same code. The aim is to freeze the assets while the Commission analyses the case, draws up a recovery plan or directs the debt towards a more radical solution. During this period, the creditor who initiated the seizure can no longer take any action to obtain payment. If the decision on the admissibility of the case is made before the referral judgment has been handed down, the enforcement judge responsible for the seizure must simply record this suspension, without being able to examine the substance of the claim.
B. The role of the over-indebtedness commission and the enforcement judge (jex)
In this context, the role of the Over-indebtedness Commission and the Enforcement Judge (JEX) is crucial in arbitrating between the rights of the creditor and the protection of the over-indebted individual. The extent to which they intervene depends on the stage reached in the seizure of the property. While suspension is automatic before the sale of the property is ordered by the court, the situation changes once this stage has been reached.
Art. L. 722-4 of the Consumer Code establishes a specific rule for this situation. If the decision on the admissibility of the over-indebtedness application is made after the referral ruling, the seizure is no longer automatically suspended. It is then up to the Commission de surendettement to refer the matter to the Juge de l'Exécution (Enforcement Judge) in order to request, by means of a specific application, a postponement of the auction hearing date, i.e. the date of the auction sale. The judge may only grant this postponement for serious and duly justified reasons. The purpose of this provision is to ensure that the over-indebtedness procedure is not used as a delaying tactic to frustrate a compulsory sale that has already been decided and ordered.
C. Prior application for suspension of proceedings
There is an emergency protection that can be activated even before the decision on the admissibility of the case by the Commission. Faced with an imminent threat, such as a very imminent auction date, the debtor can request rapid intervention. Art. L. 721-4 of the Consumer Code allows the Commission, at the request of the debtor and in urgent cases, to refer the matter to the judge in charge of protection disputes to obtain a provisional suspension of enforcement proceedings.
This referral may also be made at the initiative of the Chairman of the Commission, his delegate or the local representative of the Banque de France. When the seizure of property has already begun, the judge may, if necessary, order the postponement of the sale date after a short hearing. This is an exceptional measure that makes it possible to preserve the debtor's rights while the Commission rules on his request to deal with his over-indebtedness, thus avoiding a situation that could become irreversible.
II. Personal recovery: a specific procedure compared with seizure of property
When an individual's financial situation has deteriorated to such an extent that no recovery plan seems possible, the law provides for an ultimate solution: personal recovery. For the most compromised situations, the personal recovery procedure may be considered, offering a solution for writing off the non-business debt that prevents enforcement measures. This procedure, often referred to as «civil bankruptcy», has a direct impact on a pending property seizure.
A. Legislation and conduct of the personal recovery procedure
Personal recovery is open to debtors in good faith who find themselves in an «irretrievably compromised situation», characterised by the manifest impossibility of implementing a conventional recovery plan. The procedure is initiated by the Commission de surendettement, which selects one of the two forms of personal recovery.
The first is personal recovery without judicial liquidation, provided for in art. L. 741-1 of the French Consumer Code. The Commission may impose this directly when the debtor has no assets that could be sold, with the exception of furnishings needed for day-to-day living and assets essential to his or her professional activity. The second is personal recovery with judicial liquidation. In this case, the Commission refers the matter to the Protection Litigation Judge to open the procedure, which entails the appointment of a liquidator responsible for realising the debtor's assets.
B. Impact on enforcement procedures and the realisation of assets
The opening of a personal recovery procedure, with or without liquidation, entails the suspension and prohibition of all enforcement procedures, including seizure of property. If such a measure was in progress, it is stopped immediately. In the case of recovery with liquidation, the appointed liquidator takes control of the debtor's assets. He has twelve months to sell the assets, either by mutual agreement or by forced sale.
Article 39 of the source document specifies that if a seizure of property has been suspended, the liquidator is subrogated to the rights of the seizing creditor. In practical terms, this means that the seizure can resume at the stage at which it was interrupted, but it is now carried out by the liquidator on behalf of all the creditors and no longer solely for the benefit of the original creditor. This subrogation, which has a direct effect on the procedure, ensures collective management of the realisation of assets. In the most serious cases leading to recovery with liquidation, the consequences are similar to those of a judicial liquidation of the debtor as an individual, In this case, the rules governing the seizure of property have been superseded by the system of collective proceedings.
III. Protection of the main dwelling and eviction measures
At the heart of the over-indebtedness procedure is the desire to preserve the debtor's home as far as possible. The issue of protecting housing is central, and the home eviction measures of the debtor are governed by specific rules in cases of overindebtedness, which aim to strike a balance between the rights of the owner or creditor and the need to avoid making the debtor's situation even more precarious.
A. Court approval of the overindebtedness plan and its consequences
The overindebtedness treatment plan, whether agreed or imposed by the Commission, may contain measures affecting the main dwelling. Since a reform in 2016, the powers of the Commission de surendettement have been increased. Previously, the most serious measures, such as selling the home, had to be approved by a judge. From now on, art. L. 733-4 of the Consumer Code now allows the Commission itself to impose certain measures by means of a special reasoned decision.
It may also provide for the sale of the debtor's main home. This decision is often taken when it is economically unsustainable for the household to continue living in the property. The Commission also has the option of imposing a partial write-off of debts, in particular the part of the mortgage that would remain outstanding after the sale of the property. The aim is to ensure that once the home is sold, the debtor does not continue to owe a residual property debt that would prevent him or her from being rehoused in the long term.
B. Specific features of measures to evict debtors from their homes
The over-indebtedness procedure also offers protection against eviction. Art. L. 722-6 of the Consumer Code stipulates that once the case has been accepted, the Commission may refer the matter to the judge for the purpose of suspending eviction from the debtor's home. In urgent cases, this referral may also be made at the initiative of the Chairman of the Commission or the debtor himself.
The judge has considerable discretion and will only grant the suspension if the debtor's situation so requires. This protection is limited in time, with a maximum duration of two years. It is designed to give debtors a breathing space while they work out solutions to their over-indebtedness, without unduly affecting the rights of homeowners or mortgagees.
Managing a property seizure as soon as the summons to pay is received, in the context of overindebtedness or personal recovery, is a technical matter that requires a detailed knowledge of procedures and deadlines. Ultimately, suspending the seizure of property for over-indebtedness is an essential protection mechanism that forms part of all the civil enforcement procedures aimed at balancing the rights of the parties. If, as an over-indebted individual, you are facing a property seizure, the assistance of a competent lawyer is crucial to asserting your rights. His or her practical experience of these procedures will improve your chances of obtaining the most suitable solution and of exploring all the options for resolving your debt. defending against foreclosure, This is a service for which our firm can offer you its expertise.
Sources
- Consumer Code, in particular articles L. 721-4, L. 722-2 to L. 722-4, L. 722-6, L. 733-4 and L. 741-1.
- Code of civil enforcement procedures.
Case law
- Cour de cassation, opinion, 2nd civil chamber, 12 March 2020, no. 19-70.022: This judgment states that when the decision to accept the overindebtedness application is made before the referral judgment, the enforcement judge, when seised of an application to establish the suspension of the proceedings, does not have to verify the claim or set the amount at this hearing.
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