The admissibility of an overindebtedness application is governed by certain criteria. However, there are also situations that do not qualify as over-indebtedness.
Criteria for admissibility of overindebtedness applications
For a a comprehensive understanding of over-indebtednessArticle L. 711-1 of the French Consumer Code states that :
"Individuals acting in good faith may benefit from measures to deal with over-indebtedness.Over-indebtedness is characterised by the manifest impossibility of meeting all debts, professional and non-professional, due and payable. The mere fact of owning one's principal residence, the estimated value of which on the date on which the over-indebtedness application is filed is equal to or greater than the amount of all business and non-business debts due and payable, is not an obstacle to being considered over-indebted.
The impossibility of meeting a commitment to guarantee or jointly and severally pay the debt of a sole trader or a company also constitutes overindebtedness.
Over-indebtedness is therefore a procedure open to individuals acting in good faith.
Good faith is therefore one of the criteria for admissibility of an over-indebtedness application.
The interpretation of these criteria and their application by the courts, in particular the Cour de cassation, illustrate the extent to which a company can be considered to be a "business".constant changes in over-indebtedness law towards better debtor protection.
In In a ruling handed down on 1 February 2018, the Court of Cassation upheld the overindebtedness commission's decision that the claim was inadmissible on the grounds that :
"But whereas having noted that the commission, after examining the debtors' bank accounts, had found payments from the company Uber and discovered that Mr X... had a driver service contract with that company and held that Mr and Mrs X... had thus knowingly concealed part of their resources, it was in the exercise of its sovereign power that the court of first instance, assessing the good faith of the debtor in the light of the debtors' bank accounts, found that Mr and Mrs X... had knowingly concealed part of their resources. and Mrs X... had thus knowingly concealed part of their resources, it was in the exercise of its sovereign power that the district court judge, assessing the debtor's good faith in the light of all the information before it on the day it was ruling, held that the debtors' claim should be declared inadmissible"..
In addition, the over-indebtedness application must demonstrate that the total resources received are insufficient to pay the declared business and non-business debts.
For resources, the Court of Cassation, in a ruling dated 19 February 2015considered that :
"Whereas, in declaring Mr and Mrs X...'s claim inadmissible, the judgment held that although, pursuant to the first paragraph, in fine, of article L 330-1 of the French Consumer Code, the mere fact of owning one's principal residence cannot be held to prevent the situation of over-indebtedness from being characterised, it is nevertheless common ground that the debtors' situation must be assessed by taking into account all the assets making up their patrimony, and in particular the value of the real estate they own; that since Mr and Mrs X...'s principal residence had been valued at the sum of 140,000 euros, while the total of their debts due and payable amounted to 81,850.47 euros, their assets were far greater than their liabilities, so that the situation of over-indebtedness could not be said to exist. and Mrs X... having been valued at the sum of 140,000 euros, whereas the total of their debts due and payable amounts to 81,850.47 euros, their assets far exceed their liabilities, so that they would no longer be in debt after having sold their property, even taking into account the cost of rehousing;
That this decision, which does not comply with the provisions of the aforementioned law applicable to overindebtedness proceedings pending before the Cour de cassation, must therefore be annulled".
This ruling therefore specifies that the decision to dismiss the over-indebtedness proceedings cannot be justified on the sole grounds that the applicant owns a home worth more than the debts declared.
The decision to accept a case of overindebtedness is therefore taken on a case-by-case basis.
This admissibility has direct consequences, particularly with regard to the suspension of proceedings and the question of seizures despite an overindebtedness file.
With regard to the debts declared, the coexistence of business and non-business debts does not exclude the claimant from benefiting from the procedure.
In this respect, the Court of Cassation, in a ruling dated 29 January 2004ruled that :
"Whereas, in order to declare the application to initiate proceedings inadmissible, the judgment states that the detailed statement of debts reveals that the majority of them are business debts ;
That in so ruling, without investigating whether the debtor's non-business debts placed him in a situation of over-indebtedness, the enforcement judge deprived his decision of a legal basis in the light of the aforementioned text"..
These eligibility criteria are analysed by the overindebtedness commission when the application is submitted.
This commission will also analyse the grounds for exclusion from the over-indebtedness procedure.
For a detailed understanding of the procedure and consequences of an admissibility decision, a guide on the stages and practical effects of the over-indebtedness procedure is available.
Exclusions from the scope of over-indebtedness
Under the terms of theArticle L. 711-3 paragraph 1 of the Consumer Code :
"The provisions of this book do not apply when the debtor is subject to the procedures instituted by Book VI of the Commercial Code.
The admissibility of an overindebtedness application therefore depends on the debtor's status.
Thus, a decision of inadmissibility is taken with regard to any claim emanating from a debtor who is subject to the receivership and liquidation procedures of the Commercial Code.
This is an interpretation that the Court of Cassation confirmed, in a ruling dated 2 July 2009 :
"But whereas, having noted that part of the liabilities of Mrs X., who was unable to repay her debts, consisted of a professional debt incurred in respect of a commercial activity previously carried on, the enforcement judge correctly deduced, regardless of the date on which Mrs X. had been struck off the register of companies, that her situation was covered by the provisions of the Commercial Code and not those of the Consumer Code".
However, according to the Court of Cassation, in a ruling dated 1 June 2017for a professional not practising in his or her own name, but as a partner in a professional partnership :
"In so ruling, even though Mr Y... was not practising the profession of orthodontist in his own name but as a partner in a professional partnership, he was not carrying on an independent professional activity within the meaning of article L. 631-2 of the French Commercial Code, the District Court judge infringed the aforementioned provisions".
Exclusion from the scope of the procedure therefore depends on the status of the debtor, but not only that.
According to theArticle L. 711-4 of the Consumer Codeare excluded from over-indebtedness, unless the creditor agrees:
- Maintenance debts
- Criminal convictions ruling on civil interests
- Debts arising from fraud against social security bodies
- Tax debts under certain conditions
- Fines imposed as part of criminal proceedings
The same applies to debts arising from pawnbroking loans taken out with municipal credit banks, subject to certain conditions (Article L. 711-5 of the Consumer Code).
Whether a case of overindebtedness is admissible therefore depends on the nature of the debts incurred.
It is possible to declare these debts to the Commission de surendettement.
However, when it issues an admissibility decision on the overindebtedness file, the commission will expressly exclude them from the procedure.
The complexity of the over-indebtedness procedure and the issues related to enforcement procedures underline the importance of expert legal support for debtors.
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