Redeeming a deed of default?

Redeeming a deed of default?

"I've heard that it's possible to buy back default certificates from creditors - if so, what are the procedures to be followed with regard to the creditor, the debtor and the debt enforcement and/or bankruptcy office?

Jean, Geneva

At the end of seizure or bankruptcy proceedings against an insolvent debtor, the creditor who has not been paid in full receives a certificate of default.

This document allows the creditor to request a new seizure against the debtor within six months of its issue without having to restart the procedure by serving a summons to pay. On the other hand, if this deed of default follows the pronouncement of bankruptcy, it can only serve as a basis for new proceedings if the bankrupt debtor has returned to better circumstances, by which is meant that he or she has been able to reconstitute assets enabling him or her to live a little more comfortably than on the minimum subsistence level.

One of the important privileges attached to a deed of default is the possibility of requesting immediate sequestration of the debtor's assets of which the creditor has knowledge. This sword of Damocles will hang over the debtor's head for 20 years and adds to the socio-professional obstacles that already result from an entry in the debt-collection office's registers.

This is why article 149a of the Federal Debt Collection and Bankruptcy Act (LP) stipulates that the debtor may at any time pay the debt to the office that issued the certificate of property default. Once the debt has been paid in full, the entry is deleted from the register. It should be noted that, under the law, a creditor who has been paid in full is required to return his or her paid-up certificate to the debt-collection office, while a creditor who has been paid in part may keep it (art. 150 LP).

In practice, however, as most creditors are inclined to consider that the more time passes, the more their chances of being paid diminish, a debtor in difficulty who wishes to regularise his situation will often be favourably received by offering directly to his creditor to buy back a deed of default issued against him for an amount that is sometimes substantially less than the original debt. The debtor can then ask the debtor's office to write off the debt at a lower rate.