The insolvency law of Switzerland is the law governing insolvency, foreclosure, bankruptcy and debt restructuring proceedings in Switzerland. It is principally codified in the Federal Statute on Debt Enforcement and Bankruptcy (; ; ) of 11 April 1889 (as amended) as well as in ancillary federal and cantonal laws.Hunziker/Pellascio, 3 et seq.
The enforcement of non-monetary obligations is subject to civil proceedings according to the federal Code of Civil Procedure (Schweizerische Zivilprozessordnung, ZPO).
Introductory proceedings Creditors may initiate debt enforcement proceedings (Betreibungsverfahren / procédure de poursuite) by filing a debt collection request (Betreibungsbegehren / réquisition de poursuite) against the debtor with the competent cantonal debt collection office (DCO; Betreibungsamt / office des poursuites).Hunziker/Pellascio, 63 et seq.; SchKG art. 67 et seq. That request does not require any proof of the validity of the creditor's claim.Hunziker/Pellascio, 71. The DCO will then serve a summons for payment (Zahlungsbefehl / commandement de payer) on the debtor.Hunziker/Pellascio, 71 et seq.
If the debtor contests the creditor's claim, he may lodge a verbal or written objection (Rechtsvorschlag / Opposition) with the DCO within ten days of the receipt of the summons for payment.Hunziker/Pellascio, 74 et seq. In that event, the creditor must procure a court order dismissing the objection (Rechtsöffnung / mainlevée de l'opposition) in order to proceed with the enforcement of his claim:Hunziker/Pellascio, 79 et seq.; SchKG art. 79 et seq. The creditor may do so by filing an ordinary lawsuit against the debtor for the payment of the sum at issue.Hunziker/Pellascio, 80 et seq. If the creditor is already in possession of a valid court verdict confirming the contested debt, he may petition the cantonal court at the location of the DCO for a definitive dismissal of the objection.Hunziker/Pellascio, 85 et seq. If he is in possession of a signed or notarised promise by the debtor to pay the sum at issue, he may petition the court for a provisional dismissal of the objection. The provisional dismissal becomes effective if the debtor does not initiate a lawsuit contesting the validity of the creditor's claim within twenty days.Hunziker/Pellascio, 91 et seq.
If the debtor does not file an objection, or after the objection has been validly dismissed by the courts, the creditor may request execution proceedings to be initiated.
Execution proceedings
The form of the execution proceedings generally depends on the nature of the debt and on the legal status of the debtor (although numerous exceptions and some special modes of execution exist):
Debt collection by realising pledged property (Betreibung auf Pfandverwertung / poursuite en réalisation du gage): If the creditor's debt is secured by a pledge or a mortgage, the pledged property is seized and sold at auction by the DCO, as described below. These are the foreclosure proceedings under Swiss law.Hunziker/Pellascio, 59, 163 et seq.; SchKG art. 151 et seq. Debt collection by seizure of assets (Betreibung auf Pfändung / poursuite par voie de saisie): If the debt is not secured, and if the debtor is not a registered commercial entity but a private individual, all his assets can be seized and sold at auction.Hunziker/Pellascio, 58, 67 et seq.; SchKG art. 89 et seq. Debt collection by bankruptcy (Betreibung auf Konkurs / poursuite par voie de faillite): If the debt is not secured, and if the debtor is a registered commercial entity (such as a corporation), bankruptcy proceedings ensue.Hunziker/Pellascio, 60, 181 et seq.; SchKG art. 159 et seq. Under special circumstances, other persons can be subject to bankruptcy proceedings as well.Hunziker/Pellascio, 207; SchKG art. 191 et seq. For the settlement of certain debts (such as tax debts) a seizure of assets takes place instead of bankruptcy.
Debt collection by realising pledged property or seizure of assets The seizure of assets is initiated by an application for continuation (Fortsetzungsbegehren / demande de continuation) filed by the creditor with the DCO.Hunziker/Pellascio, 101 et seq.; SchKG art. 88. Unless the proceedings are limited to an item of pledged property to begin with (as in the case of foreclosure), the DCO will inventory all assets of the debtor (such as cash, valuables, real estate and future salary payments) and seize them (Pfändung / saisie) to the extent that is required to satisfy the involved creditor(s).Hunziker/Pellascio, 105 et seq.; SchKG art. 89 et seq.
Any non-liquid assets are generally sold by the DCO at a public auction. Items secured by a prior pledge or mortgage are sold only at a price sufficient to cover the amount of the mortgage, unless the creditor holding the security has requested the seizure and liquidation himself.Hunziker/Pellascio, 134 et seq.; SchKG art. 116 et seq. If the proceeds of the liquidation do not cover the debt(s) at issue as well as the cost of the proceedings, the creditors receive a certificate of unpaid debts (Verlustschein / acte de défaut de biens) that allows them to re-initiate execution proceedings at a later time.Hunziker/Pellascio, 154 et seq.; SchKG art. 149 et seq.
Debt collection by bankruptcy The proceedings of debt collection by bankruptcy under Swiss law are roughly comparable to those under Chapter 7 of the U.S. bankruptcy code. Bankruptcy (Konkurs / faillite) must be declared by the competent cantonal court on the request of the creditor.Hunziker/Pellascio, 188 et seq.; SchKG art. 159 et seq. Once it is declared, the debtor loses all control over his assets and business, and the cantonal bankruptcy office (BO) establishes a provisional inventory of the assets.Hunziker/Pellascio, 217 et seq.; SchKG art. 208 et seq.
If the assets appear sufficient to cover at least the cost of bankruptcy proceedings, the BO publishes the bankruptcy in the Swiss Official Gazette of Commerce (SOGC), whereby all creditors are asked to submit their claims to the BO.Hunziker/Pellascio, 217 et seq.; SchKG art. 232 et seq. The BO also calls a creditors' meeting within 20 days, in which the creditors may entrust either a private trustee or the BO with the administration of the bankruptcy.Hunziker/Pellascio, 223 et seq.; SchKG art. 235 et seq.
Various court proceedings may be initiated at this stage between the creditors, the debtor, the bankruptcy administrator and third parties to determine the validity of the creditors' claims, their relative rank, and the assignment of disputed assets or liabilities to the debtor or to third parties.Hunziker/Pellascio, 230 et seq.; SchKG art. 244 et seq. Once the schedule of claims (Kollokationsplan / état de collocation) as well as the assets and liabilities of the debtor are no longer contested, the second creditors' meeting may decide on the mode of liquidation of the bankrupt business; this may include a sale at auction or a direct sale of assets.Hunziker/Pellascio, 242 et seq.; SchKG art. 252 et seq.
The proceeds of the liquidation are discharged to the creditors in accordance to their rank as established in the schedule of claims. Certain creditors (such as employees for the salaries of up to six months, or for social security payments) are accorded a higher rank by law and are paid out before all other creditors.Hunziker/Pellascio, 280 et seq. To the extent the creditors remain unpaid, they receive certificates to that effect by the BO, but they may not initiate new insolvency proceedings against the debtor unless they can prove that he has acquired new assets.Hunziker/Pellascio, 252 et seq.; SchKG art. 265.
Debtor protection At most stages of the debt enforcement process, the law allows the debtor to stay the proceedings by settling his debts, coming to an accommodation with his debtors or requesting a court to examine the (continued) validity of the debtors' claims.Hunziker/Pellascio, 97 et seq. Certain assets that are considered essential to the financial and physical survival of the debtor and his family are also exempt from all enforcement proceedings.Hunziker/Pellascio, 113 et seq.; SchKG art. 92.
Security measures Creditors may request the courts to take certain measures to secure the debtor's assets in order to make them available for eventual liquidation. The most important of these measures are the arrest of assets (Arrest / séquestre) and the challenge of unfair preferences (Anfechtung / révocation).
Arrest Creditors may request a court to order an arrest to be laid on certain assets belonging to the debtor. The arrest has the effect of a provisional seizure of these assets.Hunziker/Pellascio, 287 et seq.; SchKG art. 271 et seq.
An arrest may only be ordered if the creditor can establish the prima facie validity of his claim as well as one of several statutory prerequisites for an arrest. An arrest may notably be imposed if the debtor holds a certificate of unpaid debts against the debtor, if the debtor attempts to hide or dispose of his assets, or if the debtor is not resident in Switzerland. The arrest of the assets of foreign debtors also establishes a venue in Switzerland under Swiss private international law in which the debtor may be sued by the creditor, except if the Lugano Convention is applicable.Hunziker/Pellascio, 297; art. 4 of the Swiss Federal Statute on Private International Law.
The arrest ends if it is successfully appealed in court, or if the creditor does not prosecute his claim by means of a lawsuit or a debt collection request within ten days after the arrest.Hunziker/Pellascio, 297 et seq.; SchKG art. 279 et seq.
Challenge of unfair preferences Creditors who hold a certificate of unpaid debts against the debtor, or creditors in a bankruptcy, may file suit against third parties who have benefited from unfair preferences or fraudulent transfers by the debtor prior to a seizure of assets or a bankruptcy.Hunziker/Pellascio, 304 et seq.; SchKG art. 285 et seq. If the challenge succeeds, the third party must return the assets formerly belonging to the debtor to the DBO or the BO, as the case may be, and the debtor may also be liable for criminal prosecution for bankruptcy fraud.
The law distinguishes three kinds of challenges:
Challenge of gifts (Schenkungsanfechtung / cas de libéralités): Gratuitous or effectively gratuitous transfers of assets by the debtor may be challenged if they took place within a year prior to the seizure of assets or the bankruptcy. Good-faith recipients of a gift must return it only to the extent that they remain enriched by it.Hunziker/Pellascio, 306 et seq.; SchKG art. 286 / 291 Challenge of over-indebtedness (Überschuldungsanfechtung / cas de surendettement): Certain acts of the debtor that impart an unfair preference to another creditor, such as the securing of a previously unsecured debt, may be challenged if they took place within a year prior to the seizure of assets or the bankruptcy, if the debtor was already over-indebted at the time and if the other creditor cannot prove that he could not have been aware of the over-indebtedness.Hunziker/Pellascio, 308.; SchKG art. 287 Challenge of deliberate disadvantagement (Absichtsanfechtung / cas de dol): Any other acts by the debtor may be challenged if they took place within five years prior to the seizure of assets or the bankruptcy, and if they occurred in the debtor's manifest intent to disadvantage his creditors or to benefit certain creditors to the disadvantage of others.Hunziker/Pellascio, 309; SchKG art. 288
Debt restructuring The law provides for debt restructuring agreements (Nachlassvertrag / concordat), comparable to Chapter 11 proceedings in the United States. These are court-mediated or out-of-court settlements between the debtor and his creditors aimed at preempting full bankruptcy proceedings.For an overview, see:
Debt restructuring moratorium