Any person, trader or otherwise, can declare themselves heavily in debt before a court. The court can then initiate bankruptcy proceedings.
Any person who is heavily in debt, whether or not they are registered in the trade register, may declare their insolvency to the judge of the court with jurisdiction (Art. 191 LP). If there is no possibility of an out-of-court settlement of debts, the court may then initiate personal bankruptcy proceedings, involving the liquidation of all seizable assets, including potentially their house, with a view to paying off debts.
Personal bankruptcy can have a beneficial effect on the debtor’s quality of life. In fact, it interrupts all attachments of salary, individual proceedings and other applications from creditors. It also confers greater legal protection.
However, it should be remembered that personal bankruptcy is not a way of getting rid of debt. Debts which are not covered during the proceedings remain active after the end of those proceedings. Creditors receive a document known as a loss certificate, which gives them the option of claiming what is owed to them if the debtor’s situation were to improve. Personal bankruptcy is therefore more a way of giving the debtor some respite.
Conditions required for personal bankruptcy
Personal bankruptcy proceedings may only be initiated under certain conditions:
- The debtor must demonstrate their excessive debt.
- The debtor must demonstrate to the court that no out-of-court arrangement with creditors is possible. Personal bankruptcy is only a last resort.
- The debtor must show that their budget will be balanced in the future and that they will be able to control their finances without incurring new debts. The budget after bankruptcy should, at least, include current tax. In actual fact, the purpose of personal bankruptcy is to give the debtor the opportunity to start again under the best possible circumstances.
- The debtor must have approximately CHF 4,000 to pay an advance on costs related to the bankruptcy. The procedure involves a court, the bankruptcy office and several publications in the Swiss Official Gazette of Commerce (SOGC) and in the official cantonal gazette.