French Personal Insolvency (Surendettement)

The Legal Framework: Code de la Consommation Book VII

French personal insolvency law is governed by Book VII of the Code de la consommation (Livre VII — Traitement des situations de surendettement), introduced by Law No. 2003-710 of 1 August 2003 (the Loi sur le surendettement). The regime provides a comprehensive administrative and judicial framework for individuals who are unable to meet their non-professional debts.

The law distinguishes between surendettement (over-indebtedness) and insolvabilité (insolvency). Surendettement is defined as the manifest inability of a debtor in good faith to meet their non-professional debts. The regime is designed for consumers, not businesses; professional debts are excluded and must be addressed under the procédures collectives of the Code de commerce.

The 2003 law replaced earlier fragmented provisions and established the Commission de surendettement as the central institution. The law has been amended several times, most significantly by Law No. 2010-737 of 1 July 2010 (which introduced rétablissement personnel) and Law No. 2016-1691 of 9 December 2016 (the Loi Sapin II, which strengthened creditor rights).

Commission de Surendettement

The Commission de surendettement is an administrative body attached to the Banque de France, with one commission in each French département. Each commission is composed of seven members: a representative of the Banque de France (president), a representative of the Direction départementale de la cohésion sociale, a representative of the Direction régionale des finances publiques, a representative of consumer associations, and three representatives of creditors.

The Commission’s role is to analyse the debtor’s financial situation, negotiate a debt restructuring plan, and, where no agreement is possible, recommend measures to the tribunal judiciaire. The Commission exercises broad discretionary powers, guided by the principle of traitement équitable (fair treatment) of debtors and creditors.

The Commission is accessible directly by the debtor, without the need for legal representation. Applications are submitted on a standardised form (dossier type) available at Banque de France offices and online. The Commission must decide on the admissibility of the application within three months.

The Cour de cassation in Cass. civ. 2e, 5 mars 2020 confirmed that the Commission’s admissibility decision is subject to judicial review only where the Commission has exceeded its competence or violated fundamental procedural rights. The merits of the debtor’s situation are within the Commission’s discretion.

Debt Restructuring (Plan Conventionnel de Redressement)

Where the Commission determines that the debtor’s situation is capable of improvement — typically because the debtor has regular income and can reasonably repay a portion of debts over time — it proposes a plan conventionnel de redressement (conventional recovery plan) under Articles L. 732-1 to L. 732-7 of the Code de la consommation.

The plan must provide for repayment of debts within a maximum period of seven years (extended from three years under earlier legislation). The plan may include: reduction of interest rates to zero; rescheduling of payments; reduction of the principal amount of certain debts; and consolidation of debts into a single monthly payment.

The Commission negotiates the plan with the debtor and creditors. If all creditors agree, the plan becomes binding. If one or more creditors refuse, the Commission may impose the plan by decision, which the creditor may contest before the tribunal judiciaire.

The plan is implemented under the supervision of the Commission. The debtor must comply with the repayment schedule and must report any material change in circumstances. Failure to comply may lead to the termination of the plan and the resumption of enforcement actions by creditors.

Rétablissement Personnel (Personal Recovery)

The rétablissement personnel (personal recovery), introduced by the 2010 reform, provides a discharge mechanism for debtors whose situation is irremediably compromised. Under Articles L. 741-1 to L. 741-8 of the Code de la consommation, the Commission may recommend rétablissement personnel where the debtor has no realistic prospect of repaying their debts.

The procedure has two variants. Rétablissement personnel sans liquidation applies where the debtor has no significant assets; all debts are discharged without any repayment. Rétablissement personnel avec liquidation applies where the debtor has assets that can be realised for the benefit of creditors, in which case a simplified liquidation is conducted by a mandataire judiciaire.

The debtor must satisfy the condition of bonne foi (good faith). The debtor must not have deliberately incurred debts beyond their capacity to repay, must not have concealed assets, and must not have acted fraudulently. The Cour de cassation in Cass. civ. 2e, 12 septembre 2018 held that the Commission may recommend rétablissement personnel even where the debtor’s over-indebtedness resulted from negligence, provided there was no intention to defraud creditors.

Upon the recommendation of the Commission, the tribunal judiciaire pronounces the rétablissement personnel. The judgment discharges all eligible debts, including debts owed to financial institutions, utility companies, landlords, and tax authorities. Certain debts are excluded: debts arising from criminal fines, damages for personal injury, and child support obligations.

Banque de France Role

The Banque de France is the central institution of the French personal insolvency system. The Bank hosts the Commissions de surendettement, provides administrative support, and maintains the Fichier National des Incidents de Remboursement des Crédits aux Particuliers, which records individuals who have defaulted on credit obligations.

All applications for treatment of over-indebtedness are filed with the Banque de France. The Bank reviews the application for completeness, verifies the debtor’s identity and financial information, and transmits the file to the competent Commission. The Bank also provides financial counselling services and may assist debtors in preparing their applications.

The Bank’s FICP register is central to the system. Individuals admitted to the surendettement procedure are registered in the FICP for the duration of the plan or rétablissement personnel, preventing them from obtaining new credit. The registration period is a maximum of seven years (during the plan) or five years (after rétablissement personnel).

The Conseil d’État in CE, 23 juillet 2020, Association UFC-Que Choisir upheld the legality of the FICP registration system, holding that the restriction on access to credit is proportionate to the legitimate objective of preventing further over-indebtedness.

Discharge and the Effacement des Dettes

The discharge of debts (effacement des dettes) is the final stage of the rétablissement personnel procedure. The judgment of the tribunal judiciaire that pronounces rétablissement personnel discharges the debtor from all eligible debts, subject to any partial repayment required under the liquidation variant.

The discharge has the effect of extinguishing the debts. Creditors may no longer take enforcement action against the debtor, and the debtor’s obligation to pay is permanently terminated. The discharge is opposable erga omnes (against all persons), including creditors who did not participate in the procedure.

The Cour de cassation in Cass. civ. 2e, 11 mars 2021 held that the discharge does not extinguish the liability of guarantors or co-debtors. The creditor may still enforce the debt against persons who guaranteed the debtor’s obligations unless the rétablissement personnel plan expressly provides for the discharge of guarantees.

The debtor may benefit from rétablissement personnel only once. Article L. 741-7 of the Code de la consommation provides that a new application may not be filed within five years of the judgment discharging debts, unless exceptional circumstances justify an earlier application.

Relationship with Professional Insolvency

Personal insolvency and professional insolvency are distinct regimes, but interaction between them is governed by Article L. 711-3 of the Code de la consommation. An individual who is both a consumer and an entrepreneur may be eligible for personal insolvency for their consumer debts and a procédure collective (from the Code de commerce) for their professional debts.

The Commission de surendettement must decline jurisdiction where the debtor’s debts are predominantly professional. The assessment turns on the nature of the debt, not the identity of the creditor. In Cass. civ. 2e, 5 novembre 2020, the Cour de cassation held that a debt incurred for the purpose of acquiring business equipment, even where the creditor was a consumer credit institution, was a professional debt.

Where the debtor has debts of both types, the Commission may treat the case by applying both regimes sequentially or may recommend rétablissement personnel for the consumer debts while the debtor addresses professional debts through the commercial court.

Conclusion

French personal insolvency law provides a structured and accessible framework for over-indebted consumers through the Commission de surendettement and the Banque de France. The regime offers both debt restructuring and personal recovery, allowing debtors to obtain a fresh start while ensuring fair treatment of creditors. The rétablissement personnel procedure, in particular, provides a path to complete discharge for debtors whose financial situation is irremediably compromised.