Debt in Luxembourg

The practical response depends on whether the debt is private or connected with a business. A private person living in Luxembourg may use the statutory over-indebtedness process when they cannot meet due and future non-commercial debts. Legal entities cannot use this process. A trader can qualify only after at least six months without business activity or after completed bankruptcy, and only for private debts. Deliberately worsening insolvency, hiding assets, taking new loans or disposing of assets without approval can exclude the person or later lead to cancellation of relief. For consumer credit, the lender or credit intermediary must provide information about the credit type, total amount, duration, interest, withdrawal right and consequences of default before the contract. The lender must assess solvency using current income and existing obligations. The borrower generally has 14 calendar days to withdraw. If the credit has already been paid out, the borrower normally returns the capital and agreed interest within 30 calendar days. Full or partial early repayment is permitted at any time. Compensation is generally limited to fixed-rate credit above EUR 10,000 repaid in a year: up to 1% when more than one year remains and up to 0.5% when one year or less remains. A missed payment should be discussed with the creditor without delay. A revised payment arrangement under a defaulted credit contract can prevent escalation to court. SICS is the local debt-support service delivered by Inter-Actions ASBL and Ligue médico-sociale. It can help prepare a budget, assets, creditor list and repayment plan. The local Office social can provide an access point to social assistance. The Ministère de la Famille, des Solidarités, du Vivre ensemble et de l’Accueil is responsible for the public policy framework. For regulated financial firms, the CSSF is the relevant financial supervisor, while the Direction de la protection des consommateurs is connected with the Code de la consommation. The private statutory process has three stages. The first is règlement conventionnel through the Commission de médiation en matière de surendettement. The application includes identification and estimates of income, expenses and debts, and cooperation with SICS is expected. Once the application is accepted and the register publication has occurred, enforcement, contractual wage assignments and interest generally stop from the following day. Ongoing maintenance, compensation for bodily injury caused by intentional violence and eviction are exceptions. Creditors must report certain and liquid claims to SICS within one month. A repayment plan can provide deferrals or rescheduling and normally lasts no more than seven years, except for the specific exception concerning a loan on the main residence. If no agreement is reached within six months, a default report is issued. The second stage is redressement judiciaire before the Juge de Paix at the debtor’s place of residence. The application must generally be filed within two months after publication of the default report. The court plan may include deferred payments, reduced interest and a probation or review period of up to five years. The third stage is rétablissement personnel, also called faillite civile, before the Juge de Paix. It is available only after the earlier stages have failed and the situation is irreparable. Personal assets are then liquidated, except for necessary household goods and indispensable professional goods, with the aim of preserving a dignified life and enabling a financial fresh start. Throughout the process, the debtor must cooperate with the authorities, SICS and creditors, accept suitable work where possible, avoid worsening the insolvency and follow the plan. The debtor must not prefer one creditor over others, except for ongoing maintenance, rent and essential supplies. Breaches can put the relief at risk. Creditors may seek an ordre de paiement for a clear contractual claim. A saisie-arrêt or saisie sur salaire is ordered by the Juge de Paix; the employer becomes the third party holding the seized amount, and a lawyer is not generally required. A hearing may take place within eight days. The debtor can challenge the seizure within one month. Statutory protected portions of income depend on income bands. A credit claim may be transferred to a credit servicer, but the debtor must be informed and keeps objections that could also have been raised against the original creditor. SICS support requires complete documents, while enforcement, huissier de justice and possible lawyer costs depend on the procedure. Acceptance of an application alone does not necessarily stop enforcement before the required publication, and register entries can have practical consequences. Business debts do not belong in the private over-indebtedness process. A viable business with temporary payment difficulties may seek réorganisation judiciaire par accord collectif before the commercial chamber of the Tribunal d’arrondissement. This requires a plan and creditor agreement; the sursis can last up to four months, existing debts are frozen and new operating debts remain payable. When a trader or company has cessation of payments together with ébranlement du crédit, faillite proceedings before the commercial chamber may follow. The business is then placed under the control of a curateur, creditors file claims collectively and available assets are distributed under the procedure.