The debt collection procedure in Switzerland is a legally regulated process governed by the Federal Debt Collection and Bankruptcy Act (LP). It allows creditors to recover debts from debtors in the event of non-payment.
Initiating debt collection
The procedure begins with the issuance of a payment order to the debtor, which is requested by the creditor from the debt collection office. This document formally demands payment of the debt and specifies a payment deadline.
If the debtor disputes the debt within 10 days, the procedure is halted, and the creditor must obtain a court judgment to proceed. If the debtor does not contest the debt, the process moves to either seizure or bankruptcy, depending on whether the debtor is an individual or a company.
Seizure process
In the seizure phase, the debt collection office seizes the debtor’s assets, which are then auctioned off. The proceeds from the sale are used to satisfy the debt. If the debtor is a business, the process may lead to bankruptcy, where the company’s assets are liquidated and distributed among creditors.
Debt collection request
The debt collection request is a formal application by the creditor to the debt collection office to initiate the recovery process. This first step must be meticulously prepared to meet legal requirements.
The request must be in writing and include specific details such as the full identities of the creditor and debtor, the amount of the debt, the due date, and proof of the claim if necessary. Incomplete or incorrect requests may be rejected by the debt collection office.
Once the request is filed and accepted, the debt collection office issues the payment order to the debtor, officially starting the procedure. From this point, legal deadlines begin to apply, and the debtor is formally in a state of debt collection.
Payment order
The payment order is a critical step in the Swiss debt collection process. Issued by the debt collection office following the creditor’s request, it serves as an official notification to the debtor of the due debt and a formal demand for payment.
The payment order includes essential information such as the names and addresses of the creditor and debtor, the amount owed, and any applicable fees and interest. It also specifies the 10-day period during which the debtor can contest the debt.
If the debtor wishes to dispute the claim, they must do so within this 10-day period by declaring their objection to the debt collection office. Such an objection suspends the debt collection process, and the creditor must then seek a judicial decision to confirm the debt’s validity.
If the debtor does not contest the debt within the specified period or does not respond to the payment order, the debt collection procedure proceeds to the next stages, either asset seizure or bankruptcy, depending on the circumstances.
Contesting the payment order
Contesting the payment order is a crucial aspect of the debt collection process in Switzerland, allowing the debtor to formally dispute the claimed debt.
Upon receiving a payment order, the debtor has 10 days to file an objection with the debt collection office. This objection must be in writing but does not need to specify the reasons for the dispute.
The immediate effect of the objection is to halt the debt collection procedure. The onus then shifts to the creditor to decide the next steps. To continue the collection process, the creditor must obtain an enforceable title, typically by taking the matter to court for a ruling on the debt’s validity. This may involve a full legal process, including presenting evidence, arguments, and ultimately a judgment.
If the creditor does not take steps to obtain an enforceable title within a specified period (usually one year in Switzerland), the objection results in the termination of the collection procedure.
Lifting the objection
Lifting the objection plays a critical role in the Swiss debt collection system. It occurs when the debtor has objected to the payment order, and the creditor seeks to continue the procedure.
Lifting the objection involves removing the debtor’s objection, allowing the debt collection process to resume. There are two main types: provisional and definitive lifting.
Provisional Lifting: This can be requested when the debt is based on a provisional enforceable title, such as a signed acknowledgment of debt. The creditor presents this document to the court, which then decides if the objection should be provisionally lifted. If the debtor wishes to contest this decision, they must initiate a lawsuit within a defined period.
Definitive Lifting: This applies when the creditor has a final judgment or another enforceable title against the debtor. Definitive lifting is granted automatically, and the collection process can continue immediately.
Continuing debt collection
The request to continue debt collection is a specific step following the lifting of an objection, either provisionally or definitively, in cases where the debtor has contested the payment order.
This request must be submitted by the creditor to the debt collection office, usually within 30 days after lifting the objection. The timeframe may vary depending on the situation, requiring precise understanding of the applicable laws.
The request to continue debt collection is a formal declaration of the creditor’s intent to proceed with the recovery process despite the initial objection. It informs the debt collection office that the creditor has either successfully lifted the objection through a court process or obtained a favorable judgment, and now seeks to move to the enforcement phase, whether through asset seizure or bankruptcy proceedings.
If the creditor fails to submit this request within the required deadlines, the collection process is considered closed, and the creditor loses the right to recover under this specific procedure.
Asset seizure
Asset seizure is the practical phase of recovery in the Swiss debt collection process, where the debtor’s assets are seized to satisfy the creditor’s claim.
After the creditor has filed the request to continue debt collection and all preliminary steps have been completed without opposition or after lifting the objection, the debt collection office can proceed with seizing the debtor’s assets.
The seizure process is delicate and strictly regulated. It typically begins with an inventory of the debtor’s seizable assets, which may include bank accounts, wages (within legal limits), real estate, and valuable items. Certain essential possessions are generally exempt from seizure to protect the debtor’s basic rights.
The seized assets are then sold, often through public auctions. The proceeds from the sale cover the debt collection costs and then pay the creditor. If the sale does not cover the entire debt, the creditor can continue pursuing other assets or income of the debtor.
It is crucial that the seizure process adheres to legal standards. Any deviation from the rules may lead to the seizure being annulled and potential legal action from the debtor.
Realization
Realization is the final stage of the seizure process in Swiss debt collection law. It involves the sale of seized assets and the distribution of the proceeds to satisfy the creditor’s claim.
Once the debtor’s assets have been properly inventoried and appraised during the seizure phase, the realization process is organized. This step involves converting the seized assets into cash, usually through public auctions. Strict rules govern how the sale must be conducted, including appropriate notifications, transparency, and fairness in the sale process.
The proceeds from the sale are used to cover the costs of the debt collection process, including the fees of the debt collection office. The remaining funds are then allocated to the creditor to satisfy the claim.
If the proceeds are insufficient to cover the entire debt, the creditor can continue the collection process by seizing other assets or initiating a new collection. Conversely, if the proceeds exceed the debt and costs, the surplus is returned to the debtor.
Bankruptcy procedure
The bankruptcy procedure is a method used in Switzerland to recover debts from insolvent debtors, whether individuals or companies. This process consists of several key stages.
Once the creditor has issued a payment order and the deadline for objection has passed (or the objection has been lifted), the creditor can request the debt collection office to continue the collection. In the case of bankruptcy proceedings, this leads to the issuance of a payment summons.
If the debtor is a business, the debt collection office issues a payment summons, demanding that the debt be paid within 20 days. If the debt is not paid within this period, bankruptcy can be declared.
If the debtor does not pay within the specified time, the creditor can petition the court to declare the debtor bankrupt. The declaration of bankruptcy initiates the bankruptcy procedure, and a bankruptcy administrator is appointed to oversee the process.
The bankruptcy administrator is responsible for inventorying the debtor’s assets and selling these assets. The funds generated from the sale are used to pay creditors according to a legally defined order of priority.
After paying the bankruptcy costs and secured claims, the remaining funds are distributed to unsecured creditors. The distribution is based on the order of priority and the amount of the claims.
The bankruptcy procedure concludes when all assets have been realized and funds distributed to creditors. Any remaining funds after all claims are settled are returned to the debtor.
