Law No. 89-1010 of December 31, 1989 (known as the "Neiertz law") repealed the "Scrivener laws" which protected borrowers in connection with consumer credit (Law No. 78-22 of January 10, 1978) and real estate credit (Law No. 79-596 of July 13, 1979). The Neiertz law sets out a number of procedures designed on the one hand to prevent overindebtedness of private individuals, and on the other hand to set matters right in cases of overindebtedness.
These preventive measures are aimed to improve the information and protection of borrowers and guarantors, and also to improve the information of lenders by setting up a national data base maintained by the Bank of France, of payment defaults.
As regards the settlement of cases of overindebtendess, the "Neiertz law" introduced two procedures: amicable settlement and judgement declaring civil legal reorganization. The amicable agreement procedure consists in the devising of an agreed plan approved by the debtors and the principal creditors before an administrative commission, to settle the overindebtedness. The procedure of civil legal reorganization takes place before a magistrate's court which can pronounce a decision to respread or carry forward the loan. More specifically, in the case of real estate, the judge can go as far as total or partial remission of the loan following the compulsory or amicable sale of the housing, depending on his assessment of the debtor's resources.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For additional information contact Joel Chapellier on 33 1 49 01 33 25.
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