Personal bankruptcy — in the sense of bankruptcy requested by the debtor themselves — is a step with heavy consequences, but one that may represent an orderly resolution in the face of definitive insolvency. Swiss law strictly regulates this procedure within the broader framework of debt enforcement and bankruptcy, notably as to which persons may benefit from it and its effects on assets and debts. PBM Avocats assists natural persons and directors confronted with this situation from its offices in Geneva and Lausanne.
Who May Request Their Own Bankruptcy? (art. 191 DEBA)
Under Swiss law, the right to request one's own bankruptcy is reserved for commercial natural persons registered in the commercial register (art. 191 DEBA). A sole trader, the indefinitely liable partner of a partnership or a registered self-employed person may thus present themselves voluntarily before the court and declare their insolvency.
Non-commercial natural persons — i.e. private individuals without activity registered in the commercial register — do not have this right. They can only be made bankrupt through ordinary enforcement proceedings, and only if they have accumulated debts in the context of an activity that subjects them to the bankruptcy procedure. In the event of personal over-indebtedness of a private individual, other solutions must be considered: amicable debt resolution, repayment plan, negotiation with creditors.
Immediate Effects of the Opening of Bankruptcy on Assets
From the pronouncement of the bankruptcy judgment, the debtor is divested of the administration and disposal of their assets (art. 204 DEBA). All of their assets — except for the non-attachable assets listed in art. 92 DEBA — enter the bankruptcy estate and come under the control of the bankruptcy administration. The debtor can no longer validly dispose of their assets, collect claims or contract in the name of the estate.
Regarding debts, all existing claims become immediately due (art. 208 DEBA), even those with a future maturity. Interest ceases to accrue on unsecured debts (art. 209 DEBA). Ongoing individual enforcement proceedings are suspended and will be extinguished at the closure of the bankruptcy. The debtor is required to cooperate loyally with the bankruptcy administration, declaring the entirety of their assets and debts.
The Bankruptcy Procedure: Process for the Debtor
The debtor who requests their own bankruptcy files a reasoned application with the court, accompanied by a statement of their assets (inventory of assets) and liabilities (list of debts and creditors). The court verifies the conditions, summons the debtor to a hearing and, if satisfied of insolvency, pronounces the judgment opening bankruptcy.
The procedure then runs its course: inventory by the bankruptcy office, call to creditors, establishment of the schedule of claims, realisation of assets, distribution of proceeds. If assets are insufficient to cover the procedural costs, the court may pronounce summary liquidation (art. 231 DEBA), which is faster and less costly. Our lawyers accompany the debtor throughout this procedure and ensure their rights are protected.
Discharge of Remaining Debts (arts. 265a et seq. DEBA)
At the end of bankruptcy, unsatisfied claims persist and give rise to certificates of loss. The debtor thus remains exposed to new enforcement proceedings as soon as they acquire new assets or income. To permanently escape this burden, natural persons who have requested their own bankruptcy may initiate a procedure for discharge of remaining debts (arts. 265a et seq. DEBA).
The court appoints a commissioner and sets an observation period (two to five years) during which the debtor must: cooperate loyally, allocate the attachable portion of their income to their creditors, and demonstrate that they did not cause their insolvency through serious fault. At the end of the observation period, if these conditions are satisfied, the court pronounces the definitive discharge from remaining debts — the debtor can then start afresh, freed from all their former debts.
Frequently Asked Questions about Personal Bankruptcy
Who may request their own bankruptcy in Switzerland?
In Switzerland, only commercial natural persons registered in the commercial register may request their own bankruptcy (art. 191 DEBA). Non-commercial natural persons (private individuals) cannot declare themselves bankrupt under ordinary DEBA proceedings. They may however benefit, after bankruptcy proceedings, from discharge of remaining debts (arts. 265a et seq. DEBA) if they meet certain conditions. This distinction is fundamental when choosing the strategy to adopt.
What is the dispossession of the bankrupt debtor?
From the pronouncement of the bankruptcy judgment, the debtor is divested of the administration of their assets (art. 204 DEBA): they lose the right to dispose of their assets, pay their debts, conclude contracts binding the estate, or collect claims. These powers pass to the bankruptcy administration. The dispossession covers all of the bankrupt's assets at the time of opening, as well as assets acquired during the proceedings. Only non-attachable assets (art. 92 DEBA) remain outside the estate.
What are the effects of bankruptcy on the debtor's debts?
The opening of bankruptcy makes all debts immediately due (art. 208 DEBA), even those with a future maturity. Interest ceases to accrue on unsecured claims (art. 209 DEBA). Individual enforcement proceedings against the debtor are suspended. At the end of the proceedings, if assets are insufficient, unsecured creditors receive a certificate of loss. These claims persist against the debtor, but recovery is conditional on the future acquisition of new assets.
Does bankruptcy allow discharge from all debts?
No, not automatically. At the end of bankruptcy, unsatisfied debts persist and may be resumed by new certificates of loss (art. 265 DEBA). For natural persons who have requested their own bankruptcy, a specific procedure for discharge of remaining debts (arts. 265a et seq. DEBA) may be initiated if they have cooperated loyally with the proceedings, are not responsible for their insolvency through serious fault, and if their future income will allow them to honour part of their debts.
How does the discharge of remaining debts procedure work?
The discharge of remaining debts (art. 265a DEBA) is a specific procedure applicable to natural persons who have requested their own bankruptcy. After the closure of the bankruptcy, the debtor may apply to the court to be discharged from uncovered debts. The court appoints a commissioner and sets an observation period of two to five years during which the debtor must actively cooperate and allocate the attachable portion of their income to their creditors. At the end of this period, if the conditions are met, the court pronounces the definitive discharge from remaining debts.