- Andri Ganzoni
Swiss Debt Enforcement Procedure – A Short Overview
Updated: Apr 28, 2020
If you are a creditor with a debtor in Switzerland and you just want to get a first basic understanding of the course of the Swiss debt enforcement procedure: This article is for you.
Legal Basis And The Competent Authorities
The recovery of money debt and collateral security in the form of money in Switzerland is governed the Federal Act on Debt Enforcement and Bankruptcy (DEBA) and is basically orchestrated by three actors that may interact with each other throughout two main proceedings. The three actors are the Debt Collection Office (DCO), the Bankruptcy Office (BO) and the Civil Courts. The two main proceedings are referred to as the introductory and the enforcement proceedings.
The Introductory Proceedings - How And Where To Start
As part of the introductory proceedings the creditor must file a debt collection request with the DCO at the place of the debtor, or in some cases at the place of his asset(s). This request does not require any judicial proof of the validity of a claim. The DCO will serve a payment order on the debtor. Once served, a payment order will be valid for one year. Interesting fact: the Swiss DCOs issue around 2.7 million payment orders each year.
Upon being served a payment order, the debtor may or may not object the creditor’s claim with a verbal or written objection lodged with the DCO. If the debtor does not object the claim within 10 days, the creditor may request the DCO to continue proceedings (“Fortsetzungsbegehren”) within 20 days. The fact that the debtor has not made a legal objection is noted under a special heading in the order for payment. In such an event, the enforceability of the claimed debt is neither verified by a court nor any official body, except if the debtor files action to the civil court (art. 85a DEBA)
How To Set Aside An Objection
The debtor’s objection to the payment order will bring the debt collection proceedings to a halt. It means that the creditor’s claim has been put into question and that civil court proceedings will be required to set aside such objection. To continue with the enforcement proceedings, the creditor will have to procure a court order with a so called definitive or provisional dismissal of the legal objection.
There are three different ways to obtain such a dismissal of an objection, and they all depend on the title of the claim. If the title is an enforceable court decision, arbitration award or certain public deeds, a definitive dismissal of the objection can be received in a summary proceeding (art. 80 DEBA). If the creditor's claim is based on a certified or signed debt recognition, the court may - also in a summary proceeding - provide a provisional dismissal of an objection (art. 82 DEBA). Such provisional dismissal can be challenged by the debtor in an ordinary civil court proceeding within 20 days. In case of such challenge, the enforcement proceeding will remain suspended. If the debt is not based on a special title, the debtor's opposition must be set aside in an ordinary civil court procedure.
The Ensuing Enforcement Proceedings
Generally, there are three main types of enforcement proceedings which depend on the nature of the debt and on the legal status of the debtor, i.e. private individual or legal entity. These three proceedings are briefly summarized as follows:
If the debtor is an entity registered to the commercial register, then the procedure will be continued by way of bankruptcy (art. 159 et seq. DEBA). Once bankruptcy has been declared by the competent court on a creditor's request, all creditors always converge and participate in the collective enforcement procedure. The debtor is therefore also referred to as a joint debtor. Bankruptcy means the complete liquidation of the debtor's assets and liabilities. In general, the principle of equal treatment applies, but privileged claims exist. Bankruptcy gives creditors a public-law right to conduct the proceedings and be satisfied from the proceeds; however, the debtor remains the legal owner of its assets until they are realised.
Debt Collection by Realising Pledged Property
If a debt is secured by a pledge or a mortgage, the pledged property is seized and sold at auction by the DCO (art. 151 et seq. DEBA). If the proceeds of the liquidation do not cover the secured debt as well as the cost of the proceedings, the creditor is provided with a certificate of unpaid debts allowing the creditor to re-initiate execution proceedings at a later time.
Debt Collection by Seizure of Assets
If a debt is not secured, and the debtor is not a registered commercial entity but a private individual, his assets can be seized and sold at auction (art. 159 et seq. DEBA). The DCO will make an inventory of all assets of the debtor such as cash, valuables, real estate and future salary payments and seize them, subject to the protection of the existential minimum to make a decent living (debtor protection).
At Swisslitigator.com, a service by Advokatur GTK, we advise creditors with regard to all aspects and through all phases of debt recovery in Switzerland.