Over-indebtedness in France (surendettement)

Losing control of one’s debts has not been merely a private drama for thirty-five years. The Neiertz Act of 1989 brought over-indebtedness into French law as a genuine procedure, with a commission, time limits, effects enforceable against creditors, and – at the end of the chain – the possibility of a clean slate. Understanding what one triggers by filing with the Banque de France requires distinguishing three things often confused: eligibility, the choice of treatment route, and the real scope of debt discharge. These three stages produce very different legal effects, and each wrong turn costs the poorly advised debtor dearly.

Definition and evolution

Before 1989, no specific mechanism existed for individuals overwhelmed by debt. The Neiertz Act of 31 December 1989 is the founding instrument. It introduced a legal definition of over-indebtedness and created the departmental commissions, placed under the authority of the Banque de France. The procedure rests from the outset on a dual architecture: an amicable negotiation phase, followed – in case of failure – by judicial intervention.

Since 1989, the framework has been profoundly reshaped. The Act of 1 August 2003 created personal recovery (retablissement personnel) – inspired by US Chapter 7 – allowing total debt discharge in exchange for asset liquidation. The Lagarde Act of 1 July 2010 reduced time limits and strengthened the automatic stay of enforcement upon eligibility. The Act of 18 November 2016 partially dejudicialised the procedure: the commission can now directly impose certain measures, including personal recovery without liquidation, without systematic judicial approval.

The trend is clear: the legislature has sought to accelerate processing, strengthen the commission’s powers, and broaden access to personal recovery.

Eligibility conditions

Several cumulative conditions must be met. The debtor must be a natural person: legal entities are excluded. They must be in good faith at the time of filing – good faith is presumed, and it falls to the commission or contesting creditors to establish bad faith. The inability to meet debts must be manifest – a simple temporary budget imbalance is insufficient. Since the Alur Act of 2014, being a homeowner is no longer an obstacle.

Filing may be done online, by post, or in person with the commission secretariat. The Banque de France verifies eligibility within three months. Once the commission declares the file eligible, two automatic effects occur: registration on the FICP (national payment default register), and suspension of enforcement proceedings against the debtor’s assets – including seizures in progress.

In case of rejection, the debtor has a fifteen-day appeal to the consumer protection judge.

Treatment routes: conventional plan, imposed measures, personal recovery

Once eligible, three main routes are available, depending on the severity of the situation and the nature of available assets.

The conventional recovery plan

The conventional plan is the first-line solution where the situation remains recoverable. It results from negotiation between the debtor and all creditors, under the commission’s aegis. Maximum duration: seven years (longer where the plan covers mortgage repayments on the primary residence). Content may include: rescheduling over the maximum duration, payment deferrals, interest reduction or elimination, partial capital write-off if creditors consent. The plan requires unanimous creditor agreement – one refusal suffices to trigger imposed measures.

Measures imposed by the commission

Where the amicable phase fails, the commission may impose measures unilaterally (Article L. 733-4). These include: rescheduling up to seven years, priority application of payments to capital rather than interest, a moratorium of up to two years, and partial capital discharge. These measures are enforceable against creditors unless contested within fifteen days of notification.

Personal recovery: discharge in exchange for liquidation

Where the situation is irretrievably compromised, the personal recovery procedure applies.

Without judicial liquidation (Art. L. 733-7): where the debtor has no realisable assets of significant value, the commission may directly impose this measure. Effect: discharge of all non-professional debts as at the date of the decision. The Cour de cassation has confirmed (23 November 2023, No. 22-11.535) that this discharge extends to all debts existing at that date, whether or not the creditors filed proof.

With judicial liquidation (Art. L. 742-1): where the debtor holds realisable assets, the procedure involves a court-appointed administrator who inventories and sells the assets, distributing the proceeds to creditors. Creditors must file proof of their claims within two months of the judgment’s publication, on pain of extinction. The procedure closes, where assets are insufficient, with a judgment discharging all debts prior to the opening.

Debts that cannot be discharged

The discharge is not total. Article L. 711-4 sets out a limitative list:

• Maintenance debts: alimony, child support, compensatory payments
• Criminal damages: compensation awarded to victims in criminal proceedings
• Debts from social fraud: fraudulent character assessed at the date of judgment
• Non-remissible tax surcharges under Article 1756 II of the General Tax Code
• Criminal fines

Ordinary tax debts are dischargeable. The distinction must be assessed precisely.

Importantly, discharge of a debt does not eliminate the contractual breach that gave rise to it. The Cour de cassation confirmed (31 January 2019) that discharge of rental arrears does not purge the tenant’s breach of obligations – the lease may still be terminated despite the discharge.

The surety’s position

When a principal debtor benefits from discharge through personal recovery, the creditor can still pursue the surety for the full guaranteed amount. The discharge does not constitute payment – it is a statutory release operating only towards the principal debtor. The surety remains bound and cannot exercise their subrogatory recourse against the discharged debtor.

This rule (Cass. civ. 1re, 13 November 1996, No. 94-12.856) contrasts with insolvency law, where remissions under a restructuring plan benefit sureties (Article L. 626-11 Commercial Code).

Since the Act of 1 August 2003, the procedure has been extended to surety natural persons: they may themselves file as debtors where their personal situation warrants it. The Cour de cassation has even admitted that director-sureties may qualify (Cass. 2e civ., 6 June 2019, No. 18-16.228).

FICP registration and life after the procedure

FICP registration conditions daily life: no new credit is available while registered.

• Conventional plan or imposed measures: registration for the plan’s duration, maximum seven years, with early removal possible if executed without incident.
• Personal recovery without liquidation: five years from the commission’s decision, no early removal.
• Personal recovery with liquidation: five years from closure, which may mean a total duration well exceeding five years.

Automatic removal at expiry does not always occur smoothly. It is prudent to verify personally by exercising one’s right of access with the Banque de France.

The lawyer’s role

Legal representation is not mandatory before the commission but becomes essential where significant patrimonial interests are at stake or where challenges are likely before the consumer protection judge. Key intervention points:

• Choice of treatment route: personal recovery vs. conventional plan is not neutral – it affects FICP duration, asset realisation, and credit access.
• Qualification of debts: precise analysis of each claim’s legal nature is essential to anticipate what will remain due after discharge.
• Challenge of filed claims: in liquidation, creditors must file proof; the debtor can verify accuracy of amounts, regularity of interest calculations, limitation status, and contractual clause validity.
• Defence before the consumer protection judge: a fully judicial exercise with ordinary procedural rules.