Application for a Degrévèment

Application for a Degrévèment

In general terms degrévèment will be sought in lieu of en désastre proceedings.

The key difference between en désastre and degrévèment is that degrévèment applies to individual properties, as opposed to the entirety of the debtor’s estate that the creditor who initiates the process retains control (as opposed to en désastre proceedings which are conducted by the Viscount) and the possibility of an equity “windfall”.

A degrévèment can provide a relatively rapid way of recovering a debt, along with the potential to profit by virtue of taking the surplus equity. It is worth noting that the creditor who takes the property will be responsible for selling it in order to obtain the benefit of this surplus. It is further worth noting that whoever takes the property will be liable for 3 years’ interest on arrears of rentes and hypothèques where the relevant charges were of prior date.

Procedure – initial stages

The process is usually commenced due to non-payment of a judgement debt. A secured creditor must apply for and obtain judgment from the Petty Debts or Royal Court. The debtor will then have one month to pay the outstanding amount and interest as per the judgment.

If the debt remains after one month has elapsed, the lender will need to apply for an Acte Vicomte chargé d’écrire, such application being made to the Royal Court. This authorises the Viscount to notify the debtor that they have two (if judgement from the Royal Court) or three (if judgement obtained from Petty Debts Court) months to satisfy the judgment, and that if it is not satisfied the property will be adjudged to have been renounced and therefore subject to degrévèment.

Once the relevant time period has elapsed, if the judgment is not satisfied, the creditor will need to make a further application to the court. The court will make an order that the property is adjudged renounced, allowing the degrévèment to commence.

Appointment of attournés

Two attournés are appointed by the court in order to administer the process. They act as agent for the creditor who initiates the degrévèment. Their principal responsibility is to summons all secured creditors to appear at the degrévèment hearing.

It is a matter for these creditors to decide whether or not they wish to attend, but they must inform the attournés. Further, the attournés are responsible for placing notices in the Jersey Gazette, principally to notify any unsecured creditors who may wish to file any claims relating to the debtor or their Property. These notices must be placed in the Gazette on two Saturdays prior to the hearing itself.

Prior to the hearing

The attournés must prepare and lodge a list of all those summonsed with the Judicial Greffier. The hearing itself must be scheduled to take place between four to six weeks after the court has made its order adjudging the property as renounced.

The hearing

The degrévèment hearing itself is run by the Judicial Greffier. They will call all creditors in a specified order, starting with the unsecured creditors as a single body, and then proceeding to the secured creditors who are called in order, according to the date that the relevant charge was secured, with the most recently secured creditor being called first all the way through until the first secured charge. When called, a creditor is faced with a choice. They may either take the property, on the basis that they discharge all earlier charges and prior claims and pay the attournés’ fees, or decline. It is worth noting that a secured creditor who declines to take in a dégrèvement loses his claim against the property only, and will be able to pursue the debtor for the underlying debt.

The creditor who takes will subsequently be confirmed as the “tenant après dégrèvement” on Friday afternoon in the Samedi court.

At this point they will typically pay the earlier creditors. Once this has been completed it will be open for the holder of the property to sell, releasing the equity in the property, out of which their debt can be reclaimed, with the possible benefit of the surplus equity windfall.

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