Personal Bankruptcy in Switzerland: Procedure and Consequences

Personal Bankruptcy in Swiss Law

Bankruptcy is a general enforcement procedure that covers all of the debtor's assets. In Switzerland, it is governed by the Federal Act on Debt Collection and Bankruptcy (DCBA). While bankruptcy is often associated with companies, individuals may also be subject to it under certain conditions.

Ordinary Bankruptcy (Art. 166-176 DCBA)

The ordinary bankruptcy procedure generally requires the debtor to be registered in the commercial register (art. 39 DCBA). It begins with a debt collection request, followed by a payment order. If the debtor objects, the creditor must obtain removal of the objection or file an action for recognition of debt.

If the proceedings result in an unsuccessful attachment or if the debtor fails to comply with the bankruptcy warning (art. 166 DCBA), the creditor may request the competent court to declare bankruptcy. The court examines the request and declares bankruptcy by judgment (art. 171 DCBA). The debtor is heard and may still avoid bankruptcy by paying the debt in full, including costs.

Voluntary Bankruptcy for Non-Registered Debtors (Art. 191 DCBA)

Art. 191 DCBA allows a debtor who is not registered in the commercial register to file for their own bankruptcy. This provision is particularly important for over-indebted individuals who are not subject to ordinary bankruptcy proceedings.

The conditions are as follows:

1. The debtor must be insolvent (lasting inability to pay their debts)
2. They must file a declaration of insolvency with the court
3. The court verifies that the conditions are met and declares bankruptcy

The Federal Supreme Court clarified in ATF 133 III 614 that the judge must examine ex officio whether the debtor is truly insolvent and cannot simply rely on the debtor's declaration alone.

Effects of Bankruptcy (Art. 265-270 DCBA)

The declaration of bankruptcy entails considerable consequences:

1. Divestment: the bankrupt loses the right to dispose of their assets (art. 204 DCBA)
2. Acceleration: all debts of the bankrupt become due (art. 208 DCBA)
3. Interest: interest ceases to accrue for unsecured creditors (art. 209 DCBA)
4. Publication: the bankruptcy is published in the SOGC and creditors are invited to file their claims

After the closure of bankruptcy, creditors who have not been fully satisfied receive a certificate of loss (art. 265 para. 1 DCBA). This serves as an acknowledgement of debt and allows the creditor to pursue the debtor again if their financial situation improves.

Appeal Against the Bankruptcy Judgment (Art. 174 DCBA)

The debtor may appeal the bankruptcy judgment within ten days (art. 174 para. 1 DCBA). The appeal is granted if the debtor makes their solvency plausible or proves that the debt has been paid in the meantime. The bankruptcy is then revoked, but costs already incurred remain payable by the debtor.

Practical Consequences for the Debtor

Personal bankruptcy has lasting repercussions:

1. Entry in the debt collection register for 20 years
2. Difficulty obtaining housing or credit
3. Professional restrictions in certain fields (banking, fiduciary services)
4. Obligation to cooperate with the bankruptcy office
5. Possibility of further proceedings for the unpaid balance

It is therefore essential to explore all alternatives before considering bankruptcy: arrangement with creditors, composition moratorium (art. 293 et seq. DCBA), or debt restructuring.