Judicial liquidation has the effect of blocking the property seizure procedure. Placing the debtor under judicial liquidation has the effect of interrupting or prohibiting all civil enforcement proceedings. Temporarily, at any rate.
Judicial liquidation of a legal entity debtor
The opening of insolvency proceedings halts or prohibits all civil enforcement proceedings in respect of both movable and immovable property, in accordance with article L. 622-21 of the French Commercial Code :
I.-The opening judgment suspends or prohibits any legal action by all creditors whose claim is not mentioned in I of article L. 622-17 and who wish to :
1° Ordering the debtor to pay a sum of money;
2° The cancellation of a contract for non-payment of a sum of money.
II - It shall also halt or prohibit any enforcement proceedings on the part of such creditors, whether in respect of movable or immovable property, and any distribution proceedings that did not have an attributive effect prior to the opening judgment.
III - The time limits for forfeiture or cancellation of rights are consequently interrupted.
If the seizure of property proceedings are initiated at the time of publication in the BODACC of a judgment opening collective proceedings, the proceedings are immediately interrupted.
Read also : Foreclosure
Property seizure proceedings are initiated by serving a summons to pay for the property (article R. 321-1 of the Code of Civil Enforcement Procedures). Service of the summons sets in motion a number of time limits. The opening judgment halts the running of these time limits.
Judicial liquidation of individual debtors
A debtor who is an individual may be subject to compulsory liquidation if the examination of his application for treatment of his over-indebtedness reveals that his situation is irremediably compromised, in accordance with the provisions of the first paragraph of article L. 742-1 of the French Consumer Code :
If the examination of the request for treatment of the over-indebtedness situation reveals that the debtor is in an irremediably compromised situation as defined in the second paragraph of article L. 724-1 and has assets other than those mentioned in 1° of the same article, the commission, after summoning the debtor and obtaining his agreement, refers the matter to the protection litigation judge for the purpose of opening a personal recovery procedure with judicial liquidation.
As claims that have not been declared within the time limit set by the judgment are extinguished pursuant to article L. 742-11 of the French Consumer Code, care must be taken when conducting the proceedings.
Subrogation of the liquidator in the rights of the pursuing creditor
As the liquidator's task is to realise the debtor's assets, it will often be in his interest to resume the property seizure procedure.
Paragraph 2 of Article L. 642-18 of the French Commercial Code provides that :
Where a seizure of immovable property initiated prior to the opening of the safeguard, reorganisation or liquidation proceedings has been suspended as a result of the latter, the liquidator may be subrogated to the rights of the seizing creditor in respect of the acts carried out by the latter, which are deemed to have been carried out on behalf of the liquidator, who proceeds with the sale of the immovable property. The seizure of immovable property can then resume at the stage at which it was suspended by the opening judgment.
In practice, the creditor's lawyer will contact the liquidator to ascertain his intentions and obtain authorisation to continue the proceedings.
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