Winding-up of Assets: Can the Debtor Challenge a Debt Alone?

You are a landlord in Montauban, and your tenant has not paid rent for six months. You start proceedings, obtain a judgment, but then your debtor is placed into winding-up of assets (the equivalent of judicial liquidation today). The trustee (syndic) (the professional responsible for managing the sale of assets and distributing the money among creditors) registers your debt. But suddenly, the debtor himself challenges your debt: can he do so? And can he appeal the judgment rejecting his challenge? This is precisely the question the Court of Cassation decided on 16 May 1977. A decision which, although old, remains relevant for understanding who has the power to act in collective proceedings.

The facts: a story like those that happen every day

Imagine Mr. X, a trader in Castelsarrasin, who finds himself in winding-up of assets. A creditor, Mr. Y, declares a debt (i.e., he asks to be repaid what is owed to him). The trustee verifies the debt and admits it. But Mr. X disagrees: he believes this debt is exaggerated, even unfounded. He therefore decides to challenge this admission in court. The court rules on his claim and rejects his argument. Mr. X, dissatisfied, appeals this judgment. Problem: the appeal is declared inadmissible (i.e., the Court of Appeal refuses to hear it). Why? Because, according to the law, during the entire duration of the winding-up of assets, only the trustee has the power to exercise legal actions concerning the debtor's estate. Mr. X, as debtor, does not have the capacity to act alone in court to challenge a debt. He can certainly make claims, but not bring an appeal. The Court of Cassation, seised by Mr. X, confirms this position: Article 51 of the Decree of 22 December 1967 allows the debtor to make claims, but it does not derogate from Article 15 of the Law of 13 July 1967 which gives the trustee a monopoly on judicial actions. In short, the debtor can express himself, but it is the trustee who ultimately decides to go to court.

The reasoning of the court — dissected

The Court of Cassation relies on two texts. First, Article 51 of the Decree of 22 December 1967, which allows the debtor to make claims on the state of verified debts, under the same conditions as creditors. Second, Article 15 of the Law of 13 July 1967, which provides that "during the entire duration of the winding-up of assets, the trustee exercises the actions concerning the debtor's estate". The question was whether the first text made an exception to the second. The Court's answer: no. The debtor can be heard, but he cannot himself exercise legal actions. This means that, even if the debtor disagrees with the admission of a debt, it is for the trustee to decide whether to challenge that debt in court. If the trustee considers the challenge unfounded, he will do nothing, and the debtor cannot substitute himself for him. Note, however: the debtor can always inform the trustee of his arguments, and if the trustee refuses to act, the debtor may possibly ask the judge-commissioner (the judge supervising the proceedings) to authorise him to act, but this remains exceptional. In this case, the debtor had appealed without the trustee's consent, and the Court of Appeal logically declared the appeal inadmissible. What few people know is that this rule aims to protect creditors: by centralising actions in the hands of the trustee, it prevents the debtor from multiplying dilatory appeals (i.e., appeals intended only to buy time) that would harm the speed of the proceedings.

What this means for you — concretely

If you are a creditor (landlord, for example) and your debtor is in judicial liquidation, you must understand that the trustee handles everything. You declare your debt, the trustee admits or challenges it. If the debtor himself challenges your debt, you need not worry too much: only the trustee can bring legal action. In practice, the trustee examines the debtor's challenge and, if he considers it serious, will refer the matter to court. But if the trustee does nothing, the debt remains admitted. Example: in Montauban, a landlord had a debt of €15,000 in unpaid rent. The debtor challenged the amount, claiming the flat was insanitary. The trustee considered the challenge unfounded and did not act. Result: the landlord was paid from the proceeds of sale of the debtor's assets, without a trial. If you are the debtor, you must know that your power is limited. You can put forward your arguments to the trustee, but you cannot act in court in his place. If the trustee refuses to act and you believe he is wrong, you can apply to the judge-commissioner for authorisation. But this is an exceptional procedure and rarely granted. It is therefore better to convince the trustee from the outset.

Four tips to avoid this type of dispute

• Declare your debt within the time limits: In judicial liquidation, you generally have two months from the publication of the opening judgment to declare your debt. After this deadline, you risk not being repaid. In Montauban as elsewhere, do not delay.
• Provide solid supporting documents: To avoid your debt being challenged by the debtor or the trustee, attach all relevant documents: contract, receipts, formal notices (registered letters demanding payment). The more complete your file, the less risk of challenge.
• Communicate with the trustee: If the debtor challenges your debt, do not remain passive. Contact the trustee, explain your position, provide additional evidence. The trustee is your main contact.
• If you are a debtor, do not try to bypass the trustee: You have the right to give your opinion, but do not take legal action without the trustee's consent. You risk inadmissibility (dismissal of your action) and unnecessary costs. Better to convince the trustee of your point of view.

Further reading: related case law and developments

This 1977 decision is part of a consistent line of the Court of Cassation. For example, in a judgment of 8 March 1983 (no. 81-15.234), the Court held that a debtor in winding-up of assets cannot bring a liability action against a third party on behalf of the mass (group of creditors). Only the trustee can. More recently, case law has maintained this principle in the context of judicial liquidation (the new name for winding-up of assets since the Law of 25 January 1985). Thus, even if the debtor can make observations, he does not have the capacity to act in court, unless specially authorised by the judge-commissioner. This rule is fundamental for the security of collective proceedings. It prevents the debtor from paralysing the proceedings by multiplying appeals. undefined, I have encountered cases where debtors tried to challenge debts themselves, without success. The tendency of the courts is clear: the trustee is the sole master of judicial actions.

Checklist before acting

• Am I a creditor or a debtor? If you are a creditor, declare your debt and follow the trustee's instructions. If you are a debtor, you cannot act in court alone.
• Is the debtor challenging my debt? Do not panic. The trustee will decide whether to take action. Stay in touch with him.
• Can I appeal a court decision on a challenge? If you are a debtor, no, unless the trustee authorises you or the judge-commissioner gives you special permission.
• Should I consult a lawyer? Yes, especially if the debt is significant. A lawyer specialising in collective proceedings law can help you prepare your file and communicate effectively with the trustee.

Are you in a similar situation? A 30-minute initial consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →