Dealing with Over-Indebtedness: Solutions and Procedures

Over-indebtedness is a situation in which an individual or a household can no longer cope with their debts, whether due to excessive credit, a decrease in income, or a financial emergency. In France, several mechanisms have been put in place to help over-indebted individuals regain financial stability. This article explores the solutions and procedures available for dealing with over-indebtedness.

What is Over-Indebtedness?

Over-indebtedness is characterized by a household's inability to repay personal debts, such as consumer loans, mortgages, or current debts (rent, bills, taxes). This situation can be caused by various factors, such as job loss, illness, divorce, or an excessive accumulation of debts. When a person is in a situation of over-indebtedness, it is essential to act promptly to prevent the situation from worsening.

Initial Steps to Take

When a household is in a situation of over-indebtedness, several steps can be taken to try to rectify the situation:

• Assessing the debts: The first step is to make an accurate inventory of all debts and available income. This process helps to better understand the extent of the situation and determine priorities.
• Contacting creditors: It is often possible to negotiate directly with creditors to obtain a rescheduling of debts, a suspension of payments, or a reduction in interest rates. Transparency and communication are essential during this phase.
• Seeking support: Consumer associations, financial advisors, or social services can provide valuable support by offering advice and helping to implement an action plan.

The Over-Indebtedness Commission: An Essential Recourse

In France, the Over-Indebtedness Commission, managed by the Banque de France, is the main body responsible for assisting individuals in situations of over-indebtedness. This commission can be contacted free of charge by any person experiencing difficulties in repaying their personal debts (excluding professional debts). Here are the main steps of the procedure:

• Submission of an over-indebtedness file: The over-indebted individual must fill out an over-indebtedness file and submit it to the Banque de France. This file contains information on household income, debts, and expenses.
• Examination of admissibility: The Over-Indebtedness Commission examines the admissibility of the file. If the file is deemed admissible, it means that the person is indeed in a situation of over-indebtedness and that the procedure can be initiated.
• Development of a recovery plan: If the file is accepted, the Commission proposes a recovery plan that may include a rescheduling of debts, a suspension of payments, or a reduction of amounts owed. This plan must be accepted by creditors to be implemented.
• Debt cancellation: In the most severe situations, the Commission may recommend a partial or total cancellation of debts, especially when it is established that the over-indebted individual is unable to repay their debts, even in the long term.

The Role of the Judge in Case of Disagreement

If creditors refuse the recovery plan proposed by the Over-Indebtedness Commission, the file can be referred to the judge of contentious guardianship. The judge then has the option to impose a recovery plan or, in the most extreme cases, to declare a personal recovery procedure without judicial liquidation, resulting in a total cancellation of debts.

The Consequences of Over-Indebtedness

The over-indebtedness procedure has significant consequences, both for the borrower and for their creditors:

• Registration in the Credit Repayment Incidents File (FICP): Registration in the FICP is automatic once the over-indebtedness file is deemed admissible. This registration prevents access to new credit for the entire duration of the procedure.
• Impact on assets: In some cases, the procedure may result in the sale of certain assets to repay creditors, except for assets necessary for daily life.
• Debt cancellation: In the case of personal recovery without judicial liquidation, all non-professional debts are cancelled, allowing the over-indebted individual to start afresh on a new financial basis.

Real-Life Examples

Imagine a person who has accumulated several consumer loans and is unable to repay them after losing their job. After contacting the Over-Indebtedness Commission, a recovery plan is proposed, with a rescheduling of debts over 10 years. Creditors accept the plan, allowing the person to stabilize their financial situation.

Legal Texts Regulating the Treatment of Over-Indebtedness

The treatment of over-indebtedness situations is regulated by the Consumer Code, in particular articles L711-1 to L755-1. These articles specify the conditions for the admissibility of files, the rights and obligations of borrowers and creditors, as well as the procedures for personal recovery.

Conclusion

Over-indebtedness is a challenging situation, but solutions exist to help those affected regain financial stability. The Over-Indebtedness Commission plays a key role in this process by offering recovery plans tailored to each situation. If you find yourself in difficulty, it is essential to react promptly, seek help, and not hesitate to contact the Over-Indebtedness Commission for assistance in managing your debts.