Over-indebtedness affects many people in France. This critical financial situation requires appropriate legal solutions. In 2023, more than 120,000 cases were filed with over-indebtedness commissions. Each case reveals a complex reality, where economic difficulties are intertwined with a financial crisis. a demanding and constantly evolving legal framework.
What is over-indebtedness?
The law defines this concept precisely. Article L711-1 of the French Consumer Code defines over-indebtedness as ". it is clearly impossible for the debtor, acting in good faith, to meet all of his non-business debts that are due and payable" .
This legal definition covers various situations:
- Accumulation of consumer credit
- Inability to repay a mortgage
- Unpaid running costs (rent, bills)
- Tax liabilities
A study of the document Surendettement.pdf shows that the legislator distinguishes between active over-indebtedness (multiple loans) and passive over-indebtedness (following an unforeseen event: unemployment, divorce, illness).
Conditions for taking advantage of the over-indebtedness procedure
The debtor's good faith: an essential criterion
Good faith is an essential condition. Article L711-1 of the French Consumer Code explicitly requires this. For an in-depth analysis of criteria for admissibility of a case of overindebtednessIt is essential to refer to the relevant legislation and case law, including good faith and the debts involved.
This concept is assessed according to several criteria:
- No misleading statements
- No voluntary organisation of its insolvency
- No deliberate worsening of its financial situation
Case law clarifies this concept. The Court of Cassation considers that good faith is presumed (Civ. 1re, 4 April 1991). It is up to the creditor to prove any bad faith.
In practice, a debtor who has concealed resources or taken out loans in the knowledge that he or she would not be able to repay them risks being excluded from the scheme.
Debts concerned and excluded
Not all debts can be treated as over-indebtedness.
The debts concerned are mainly :
- Consumer credit
- Lease liabilities
- Tax liabilities
- Bank overdrafts
The following are generally excluded from the scheme under Article L711-4 of the French Consumer Code:
- Maintenance debts
- Criminal fines
- Reparations awarded to victims in criminal proceedings
- Debts arising from social security fraud
Pawnbroking is also excluded from debt write-off (article L711-5).
The debtor's financial situation
The Code requires that the entire financial situation be examined.
The most important thing to remember is that owning your principal residence is no longer an obstacle to the admissibility of an over-indebtedness application, even if its value theoretically covers your debts.
This significant legislative change, introduced by the Act of 1 July 2010, is designed to help people stay in their own homes.
The central role of the over-indebtedness commission
The over-indebtedness commission, made up of the prefect and representatives of the Banque de France, plays a decisive role.
Main tasks:
- Examining the admissibility of applications
- Drawing up recovery plans
- Impose measures (rescheduling, rate reductions, etc.)
- Recommend a personal recovery
Its powers were considerably strengthened by the law of 18 November 2016. It can now impose measures without systematic judicial approval.
The procedure involves several stages:
- Submitting your application (possible online from 2021)
- Admissibility check (deadline: 3 months)
- File orientation
- Implementation of measures
For a complete and detailed guide to these steps, as well as the practical effects of the procedure, consult our article dedicated to the over-indebtedness procedure.
Preventive measures against over-indebtedness
Prevention is better than cure. The legislator has developed several preventive tools:
- National Register of Repayment Incidents (FICP)
- Obligation for credit institutions to check solvency
- Strict controls on revolving credit
These mechanisms are still inadequate. Other European countries have adopted more effective mechanisms, such as the positive credit register.
When should I consult a lawyer?
Personalised legal advice is needed in a number of cases:
- Challenging a commission decision (deadline for appeal: 15 days)
- Complex assets (real estate, matrimonial property regimes)
- Refusal of admissibility for lack of good faith
- Personal recovery procedure with judicial liquidation
- Personal guarantors involved in debts
Our firm helps people in financial difficulty. We analyse your situation and determine the best legal strategy for you. The first assessment meeting enables us to identify the solutions best suited to your particular case. Contact us to make an appointment and get out of the debt rut.
Sources
- Consumer Code, articles L711-1 to L743-2
- Document "Surendettement.pdf", Répertoire de procédure civile, Stéphane PIÉDELIÈVRE, November 2021
- Court of Cassation, Civil 1st, 4 April 1991, no. 90-04.013
- Law no. 2016-1547 of 18 November 2016 on the modernisation of the justice system for the 21st century
- Banque de France 2023 annual report on overindebtedness
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