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Overindebtedness in France: 6 major benefits of the reform

Overindebtedness in France: 6 major benefits of the reform

Lucie Dulamon, Legal expert at FRANCE CREANCES

From 01.01.2018 the measures to apply stem for:

SIMPLIFY THE OVERINDEBTEDNESS PROCEDURE IN FRANCE

To refocus the Judge role on his jurisdictional power to rule the litigations 

 

MAKE IT MORE EFFECTIVE...

To relieve the district courts giving new powers to over indebtedness committees

 

...AND SHORT AS POSSIBLE

To speed up the procedure: the advised and imposed measures will immediately be applied further to validation from the committee.

 

The 6 major benefits of the reform:

  • 1- Suppression of the conciliation period in case of lack of real estate

(That’s to say in most cases)

From now on each over indebtedness file without real estate is oriented towards imposed measures by the committee (rescheduling, postponement of the reimbursement commitments, or procedure of personal recovery).

The over indebtedness committee will have to try a conciliation as much as possible, with a view to elaborate a conventional plan of recovery in the presence of a real estate, if the debtor’s resources or his current assets allow it.

 

  • 2- Precisions on the date of the coming into force of the conventional recovery plan

For each over indebtedness file submitted from 01.01.2018 and in which a conciliation period is advised by the committee, a conventional recovery plan is proposed to the parties. The last one comes into force from the date fixed by the committee, or failing that, at the latest, from the last day of the month following the sending date of the approval plan letter from the committee.

 

  • 3- Claim time limit and consequences of missing answer

The creditors have 30 days to refuse the recovery plan proposal: this deadline accrues from the date of notification of measures sent by the committee by registered letter with acknowledgement of receipt (previously the parties only had 15 days to lodge appeal).

From now on the creditor agreement is considered obtained in the absence of answer. So the creditors can spare this formality insofar as they do not want to refuse the recovery plan proposal.

 

  • 4-Intensification of the role and the power of the over indebtedness committee

Previous situation: the advised measures had to necessarily be approved by the Judge of the district court. The suppression of this obligation is a significant evolution.

From now on in case of failure or in the absence of a conciliation mission, and upon request of the debtor, after observations from the parties, the committee can impose the following measures:

  • Rescheduling of the debts payment
  • Allocation of the payments on the principal amount as a priority
  • Suspension of the payability of the claims other than those concerning the daily living, for a time limit inferior or equal to 2 years

The committee also can impose, by special and motivated decision,

  • the reduction in the amount of the part of the property loans which remain due to the Banks at the moment of the forced sale of the main debtor housing
  • or the partial cancellation of the debts.

 

  • 5- Time limit in the implementation of imposed measures

The adopted measures will be applied to a date fixed by the committee or in the absence, at the latest, the last day of the month following the date of the letter of notification of the imposed measures sent by the committee to the parties.

However these measures cannot be opposable to the creditors whose existence would not have been reported by the debtor, and as a fact, who do not have to be informed about these measures.

 

  • 6- Role of the Judge of the district court

  • Procedure of personal recovery with bankruptcy

    When the debtor is in a situation irremediably compromised, the committee can impose a personal recovery procedure without bankruptcy.  

    It’s the case when the debtor does not have any current assets (except the furniture necessary to the current life or assets without any commercial value). The committee must published this decision to the BODACC (Official Journal of the civil and commercial notices) to allow creditors (who would not have been informed) to register an appeal within 2 months from the publication before the Judge in the district court.

    On the other hand, the committee always must submit the case to the Judge of the district court for the opening of a procedure of personal recovery with bankruptcy (in case of current assets) but with the prior agreement from the debtor: whether the debtor refuses or does not answer the written notification to attend, the committee could impose the above mentioned measures as for instance the rescheduling of the debts payment.  

     

    • Claim regarding the imposed measures

    In case of a claim concerning the imposed measures, the Judge of the district court regains his jurisdictional power and is qualified to rule and order new measures.

    The modes of disputing the imposed measures and the personal recovery without bankruptcy decisions are moreover modified: from now on the parties must directly give their file to the Administration Office of the committee or send a registered letter with acknowledgement of receipt, within 30 days from the measures notification date.  

    The measures will be the only ones valid from the date fixed by the committee or failing that, the last day of the month following the date of the registered letter with acknowledgement of receipt of the measures notification.

    These measures could not be opposed to the creditors, who would not have been duly informed and who would not have been reported by the debtor to the over indebtedness committee.

    Overindebtedness
    reform