In Swiss federal insolvency and bankruptcy law provisions are made to seize a debtors assets and render them available for execution without prior notification. The procedure is known as the distraint or distress procedure and the court injunction is also referred to as a freezing order.
The creditor needs to apply to the court in whose jurisdiction the assets to be seized are located. The court issues a warrant of distress or distraint (freezing injunction) and authorizes a Debt Enforcement Officer to seize the specified assets, often the balance of a bank account. After seizure the creditor has ten days to file the next step in the proceedings, otherwise the distress warrant is automatically annulled.
- credibility or plausibility of the debt (prima facie evidence is sufficient)
- the debt must be unsecured
- the debt must be due
- at least one reason for distress has to apply:
- the debtor has no permanent residence
- the debtor secretes assets in order to avoid paying debts
- the debtor prepares for flight
- the debtor is passing through
- the debtor doesn’t reside in Switzerland and no other reasons for a distress order are available, and the debt is sufficiently related to Switzerland, or the debt is based on an executable court decision or a promissory note
- the creditor is in possession of a certificate of loss
- the assets to be seized have to be exactly specified
- the assets to be seized may not be unseizable
Pursuing the restraint order
Under Swiss law the creditor has to take all the necessary steps to have the seized assets liquidated to satisfy his claim. The law provides only very little time for the creditor to take the necessary steps. If the creditor fails to take the necessary steps in time, the restraint order is automatically annulled.
- The time available between each step is ten days.
- Once the assets are seized, the creditor has to initiate enforcement action (issue of a default summons) within ten days of seizure.
- If enforcement action was already initiated and the debtor contested the default summons, the creditor has to initiate a legal action to overturn the contestation within ten days.
- Depending on the nature of the debt and the evidence at hand, there are several ways in which to overturn the contestation.
- Once the contestation has been overturned the creditor again has ten days to initiate continuation of the enforced collection procedure.
- This results either in the liquidation of the assets with payment to the creditor out of the resulting cash
- Or the creditor has to file a bankruptcy action against the debtor, if the debtor is a company or person registered in the commercial register.
For more information please visit: www.freezing-orders.ch.