When individuals find themselves unable to meet their financial commitments, the law provides for a range of mechanisms designed to offer them a way out and to organise the resolution of their situation. Over-indebtedness is not an inevitability, but a regulated legal situation, the treatment of which aims both to protect the debtor and to respect the rights of creditors. Understanding the workings of this procedure is essential for anyone facing serious economic difficulties. This approach is part of a wider framework designed to provide a framework for procedural arrangements to protect the debtoroffering graduated solutions depending on the seriousness of the situation.
Personal over-indebtedness: definition and scope
The over-indebtedness procedure is designed for individuals acting in good faith who are no longer able to pay off their debts. Access to the procedure and the terms and conditions are strictly defined by the French Consumer Code, which sets out the broad outlines of the procedure and organises the involvement of a key player: the over-indebtedness commission.
The concept of over-indebtedness and the debts concerned
Article L. 711-1 of the Consumer Code defines over-indebtedness as follows "manifest impossibility of meeting all its non-business debts that are due and payable".. This definition rests on two pillars. Firstly, it must be "manifest", i.e. obvious and not temporary. Secondly, the procedure only concerns "non-business" debts: debts contracted for everyday needs (consumer credit, rent, energy bills, etc.) are therefore the only ones taken into account. Business debts relating to a commercial, craft, agricultural or professional activity are covered by specific collective procedures.
However, not all non-business debts are treated in the same way. The Consumer Code expressly excludes certain debts from any rescheduling, remission or write-off, unless the creditor agrees. These are mainly :
- Alimony debts.
- Financial compensation awarded to victims following a criminal conviction.
- Criminal fines, which are totally excluded from any adjustment.
The debtor's good faith is a fundamental condition for benefiting from the procedure. It is presumed, but may be challenged if the debtor has knowingly increased his indebtedness or organised his insolvency.
The central role of the over-indebtedness commission
The over-indebtedness procedure is initiated by the debtor himself, who must file an application with the commission de surendettement des particuliers (over-indebtedness commission for private individuals) in his département. This body, whose secretariat is provided by the Banque de France, plays a pivotal role. Its first task is to examine the admissibility of the application, i.e. to check whether the applicant meets the legal conditions, in particular the existence of over-indebtedness and good faith.
Once the application has been deemed admissible, the commission has extensive powers to examine the case. It draws up a detailed statement of the debtor's assets and liabilities, if necessary requesting information from public administrations, credit institutions or social organisations. This investigation phase is essential to obtain a complete and accurate picture of the household's financial situation. On the basis of this assessment, the commission will direct the case towards the most appropriate solution, ranging from negotiating a repayment plan to recommending that the debts be written off.
Initial interference with civil enforcement proceedings
The Commission's decision to accept an over-indebtedness case has immediate and significant consequences for any legal action that may be taken by creditors. It marks the start of a period of protection for the debtor, illustrating in concrete terms the impact of over-indebtedness on compulsory enforcement. The aim is to freeze the situation so that the commission can work calmly to find a lasting solution.
Suspension and prohibition of prosecution
As soon as the case is declared admissible, enforcement proceedings are automatically suspended. Under article L. 722-2 of the French Consumer Code, creditors can no longer initiate or pursue seizures on the debtor's assets or bank accounts. This suspension applies to the seizure of assets and the sale of movables, and also paralyses the seizure of wages.
This protection is temporary and lasts for the duration of the proceedings before the commission, up to a maximum of two years. It provides an essential respite for the debtor, who is no longer under direct pressure from the bailiffs. In return, debtors are required not to worsen their situation. Unless authorised by the judge, they are prohibited from paying a debt that arose before the decision to accept the debt or from selling any of their assets unless this is part of their normal management.
Suspension of eviction proceedings
The loss of a home is one of the most dreaded consequences of overindebtedness. The law therefore provides for a specific mechanism to prevent this situation. Once a case has been accepted, the commission can ask the judge to suspend any eviction proceedings already underway. If the suspension is granted, it can be for a maximum period of two years.
This measure is a powerful tool for keeping debtors and their families in their homes while an overall solution to their debts is found, often including a plan to pay off the rental debt. It is a concrete manifestation of the rights and protection of tenants in difficulty against evictionwhich is linked to the over-indebtedness procedure.
Other debtor protection measures
Protection of the debtor does not end with the suspension of seizures. The admissibility decision has other beneficial effects. The accrual of legal and contractual interest and penalties for late payment on debts is halted. This measure prevents the debt from continuing to grow while the case is being examined. In addition, the debtor's entitlement to housing benefit (APL, AL) is restored, guaranteeing a resource that is often essential to the household budget. Finally, the debtor can no longer be registered in the Fichier des incidents de remboursement des crédits aux particuliers (FICP) for the debts examined by the commission.
Measures for dealing with over-indebtedness
Once the situation has been analysed, the over-indebtedness commission focuses on concrete solutions to clear the debt. Priority is given to a negotiated solution, but the law also gives the commission the power to impose measures if no agreement is reached. These solutions are similar in philosophy to granting payment deadlines and debt adjustmentbut within a collective, formalised framework.
The conventional recovery plan: negotiation and content
The first step explored by the commission is the search for an agreement between the debtor and its main creditors. The aim of this conciliation phase is to draw up a conventional recovery plan. This plan, which has a maximum term of seven years (except for the repayment of a property loan linked to the principal residence), may contain various measures:
- A rescheduling of payments.
- A postponement of deadlines.
- A reduction in interest rates.
- Partial debt remission, with the agreement of the creditors concerned.
The advantage of this plan is its consensual nature. It is signed by the debtor and the creditors, which makes it easier to implement. If it is adhered to, it will enable the debt to be gradually paid off and the debtor to emerge from over-indebtedness in a sustainable manner.
Measures imposed by the commission (rescheduling, partial remissions, deadlines)
If the conciliation phase fails, the commission is not helpless. It can impose binding measures on creditors (with the exception of maintenance and criminal debts). These are similar to those in a conventional plan: rescheduling debts, giving priority to payments from the capital, or even reducing the interest rate. The commission may also impose a moratorium, i.e. a suspension of payment of debts for a maximum period of two years. During this period, the debtor does not have to pay anything on the debts concerned, which may enable him to stabilise his financial situation.
In the most difficult cases, where simple rescheduling is not enough, the commission may recommend partial debt write-off, combined with a repayment plan for the balance.
Guaranteed payment of the debt and the limits of the suspension of proceedings
Treatment measures, whether agreed or imposed, are enforceable against creditors, who cannot resume their individual lawsuits as long as the plan is being complied with. Execution of the reorganisation plan therefore paralyses enforcement proceedings. However, this suspension does not deprive a creditor of the right to take legal action to have his claim recognised and obtain a writ of execution. The creditor will simply not be able to use this title to proceed with a seizure while the measures are in force. If the debtor does not comply with the plan, it becomes null and void, and creditors recover their individual right to take legal action for the balance of their claims.
Personal recovery: debt forgiveness for a new life
For the most serious situations, where no repayment plan can be envisaged, the law provides for a more radical procedure: personal recovery. This is a procedure for the total or almost total cancellation of debts, offering the debtor a genuine second chance.
Irreparably compromised situations: conditions for access to personal recovery
Personal recovery is reserved for debtors whose situation is deemed to be "irremediably compromised". This concept means that it is clearly impossible to implement conventional treatment measures. In concrete terms, the debtor's resources are so low, or their liabilities so great, that no repayment effort, even spread over the maximum period, would enable them to clear their debts. It is up to the commission, or the judge in the event of a dispute, to assess whether the debt is irremediable.
Personal recovery without judicial liquidation: conditions and effects of total debt cancellation
This is the simplest and quickest form of personal recovery. It is implemented when the debtor is in an irremediably compromised situation and has no assets of value that can be seized. If the debtor's assets are limited to items necessary for day-to-day living (furniture, non-luxury vehicle essential for work), the commission may directly impose a personal recovery order without liquidation. Once this decision is final, all of the debtor's non-business debts are written off (with the exception of debts excluded by law). Creditors can no longer claim anything.
Personal recovery with compulsory liquidation: procedure, excluded assets and closure
If the debtor has assets (property, a valuable vehicle, savings, etc.), even though their situation is irremediably compromised, the personal recovery procedure takes the form of a judicial liquidation. With the agreement of the debtor, the judge opens the procedure and appoints a liquidator. The liquidator is responsible for selling the debtor's seizable assets within one year.
Assets essential to the debtor's life and work, as defined by the Code of Civil Enforcement Procedures, are excluded from the sale. The proceeds of the sale are divided among the creditors. At the end of the procedure, the judge closes the case on the grounds of "insufficient assets". This ruling removes all debts that could not be repaid through the sale of the assets. The debtor can then start afresh, free of the burden of his debts.
A return to a recovery plan if the situation improves
The system retains a degree of flexibility. Even under a personal recovery procedure, if the debtor's situation improves significantly (for example, an unexpected return to employment), it is exceptionally possible to switch to a recovery plan. This option is rare and is designed to enable creditors to be paid if liquidation can be avoided without compromising the debtor's return to financial equilibrium.
Social and budgetary support for debtors
In addition to the purely legal and financial treatment of debts, the law recognises the importance of human support. At all stages of the procedure, whether by the commission or the judge, the debtor may be asked to apply for social assistance measures. Personalised social support (MASP) or a budget education programme can be set up. The aim is to provide the debtor with the tools and support they need to manage their budget independently and sustainably, and thus prevent a further spiral into debt. This social dimension is an essential complement to recovery measures to ensure their long-term effectiveness.
The over-indebtedness procedure is a complex process, punctuated by technical stages and strategic choices. Whether you are negotiating a plan, contesting a measure or considering personal recovery, the assistance of a professional is essential if you are to assert your rights and choose the most appropriate course of action. Faced with the challenge of stabilising your financial situation, recourse to a lawyer specialised in overindebtedness is the best guarantee of secure and effective support.
Sources
- Consumer Code
- Code of civil enforcement procedures
- Civil Code
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