Commercial and Dispute Resolution

New law to combat excessive debt burden and protect enterprises in distress

On July 1, 2024, the Belgian Official Gazette published the law of May 15, 2024, aimed at combating excessive debt and protecting enterprises in financial distress. This new legislative framework introduces several key measures designed to prevent individuals and businesses facing financial difficulties from being burdened with additional legal procedures and costs. In this newsflash, we will delve into the law's objectives, key provisions, and the implications for affected parties.

Early detection of financial difficulties

Objective

The primary goal of the law is to identify and address debt claims early when they cannot be collected due to temporary or structural financial problems. By intervening at an early stage, the law aims to prevent further legal and financial complications for individuals and businesses already struggling with debt.

To this end, the law identifies several key measures:

• The CBB (Central Register for notifications of attachment, delegation, transfer, collective debt mediation and dispute) will now include notifications of 'non-detection' (report of the visit of a bailiff to the debtors registered address) and 'amicable debt mediation.' This expansion ensures that debt-related issues are recorded and addressed promptly.
• When financial difficulties are detected, existing debt mediators must be notified to incorporate the debt into a repayment plan. This step aims to provide a structured approach to managing and resolving debt.

Protection measures for distressed enterprises  

One of the significant changes introduced by the law is the enhanced access to information regarding judicial reorganization, bankruptcy procedures, and transfers under judicial authority. This information will now be accessible through the CBB, eliminating the need for bailiffs to search through the Belgian Official Gazette. This change makes the process more user-friendly and efficient.

New notifications

Bailiffs must file the threatening insolvency control notice when a situation indicates an immediate or future threat to the continuity of the debtor's business. The Chamber for Enterprises in Difficulty (KOIM) will be automatically notified, ensuring that potential insolvency issues are addressed promptly and effectively.

Optimized attachment procedures

Often, successive attachment on movable goods are carried out on the same debtor for different creditors. Bailiffs follow similar procedures each time, resulting in repetitive costs. The debtor is repeatedly subjected to intrusive inventories of their belongings.

The Judicial Code includes two procedures to avoid successive attachments on movable goods, namely "common attachment" and "attachment by comparison and extension" (Art. 1524 Judicial Code). These allow a creditor to join an attachment procedure previously executed at the request of another creditor. However, these procedures are rarely used in practice due to various limitations and inconveniences.

The law introduces improvements and digitalization to the procedures for common and comparative seizures. These changes are designed to reduce unnecessary costs and avoid repetitive movable seizures by different bailiffs. By optimizing and digitizing communication among seizing bailiffs, the law aims to streamline the process and enhance efficiency.

New law introduces balanced and effective debt resolution measures

The new legislation aims to foster a fair and efficient debt resolution process through several key provisions.

Firstly, bailiffs will now undergo specialized training in communication and facilitation skills. This initiative is designed to enhance their interactions with debtors, promoting more empathetic and effective resolution of sensitive debt cases.

Additionally, courts are empowered to raise the argument regarding statute of limitations ex officio in debt collection cases initiated by businesses against consumers. This provision aims to protect consumers from prolonged and potentially unfair debt collection practices, ensuring a more equitable process.

Moreover, bailiffs are mandated to confirm payment plans in writing (after agreement from the creditor) and send reminders before proceeding with enforcement actions in cases of non-compliance. This measure ensures that debtors are fully informed about their obligations and have ample opportunity to adhere to payment plans before facing further enforcement. In addition, payment plans coming into force with intervention from the bailiff, and being adhered to by the debtor, suspend any means of execution.

Finally, bailiffs are required to refuse sales if they determine that the value of seized goods is insufficient to cover the costs of the sale. This provision is designed to prevent unnecessary and costly sales that do not benefit either the creditor or the debtor, ensuring that enforcement actions are both practical and fair.

Collectively, these measures aim to balance the rights of debtors and creditors, fostering a more humane and efficient debt resolution process. Effective dates  

The law will be implemented in phases, with different provisions coming into effect on various dates. This staggered approach allows for a gradual transition and ensures that all parties have time to adjust to the new requirements. The timeline for the entry into force of each respective obligation is as follows:

• Articles 3, 2°, 4, 1° and 2°, and 7 to 13, will come into effect on July 1, 2025, unless an earlier date is set by the Royal Decree .
• Articles 2, 4, 3° and 4°, 6, and 14 to 16will be effective on October 1, 2024.
• Article 5 (training for bailiffs) will be effective on January 1, 2025.

Conclusion

This new law is a significant step towards alleviating the burden of excessive debt and providing vital protection to enterprises in financial distress. By implementing early detection measures, enhancing information access, optimizing seizure procedures, and introducing diverse provisions to combat debt, the law aims to create a more supportive and sustainable environment for debt resolution.

For more detailed information and guidance on how this law might impact your business, please visit our website or contact the Deloitte Legal team.

Contacts

If you have any questions concerning the items in this newsflash, please get in touch with your usual Deloitte Legal - Lawyers contact at our office in Belgium or:

Glenn Hansen, glhansen@deloitte.com, + 32 477 18 48 81

For general inquiries, please contact: bedeloittelegal@deloitte.com, + 32 2 800 70 00

Be sure to visit us at our website: http://www.deloittelegal.be