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Controlled liquidation of the over-indebted debtor: which assets and income stay outside and what happens afterwards

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In breve: in controlled liquidation, the assets of the debtor in over-indebtedness are liquidated for the benefit of creditors under the supervision of the court (arts. 268-277 of the Codice della crisi, the Italian insolvency code). The debtor may apply with a petition; if the debtor is insolvent, a creditor may also apply, but the procedure does not open if the matured and unpaid debts are below 50,000 euros (an amount periodically updated). Non-seizable claims and the part of income needed for the maintenance of the debtor and family stay outside the liquidation. On closure, or after three years from opening, discharge may apply (art. 282).

Who applies and when it opens

A debtor in over-indebtedness may apply to the court for the opening of controlled liquidation of their assets (art. 268, paragraph 1; the debtor's application: art. 269; opening: art. 270). If a natural person files the application, the procedure opens when the OCC (the debt-crisis advisory body) certifies that distributable assets can be acquired, including through court actions. If instead a creditor applies against a natural person, the procedure does not open when the OCC, at the debtor's request, certifies that no distributable assets can be acquired: the debtor must raise the objection by the first hearing, attaching the documents listed in art. 283, paragraph 3. Anyone with no assets to liquidate should therefore look at the discharge of the debtor with no assets.

What stays outside the liquidation

Art. 268, paragraph 4, excludes from liquidation: claims that cannot be seized under art. 545 of the Code of Civil Procedure; maintenance and support claims, salaries, pensions, wages and business earnings of the debtor, within the limits set by the judge for the maintenance of the debtor and family; the fruits of the legal usufruct over the children's property, property held in a family trust fund (fondo patrimoniale) and the related fruits (subject to art. 170 of the Civil Code); things that cannot be seized by law.

Interest and concurrence of creditors

Filing the application suspends, solely for the purposes of creditor concurrence, the accrual of contractual and statutory interest until closure, except for claims secured by mortgage, pledge or privilege. The later stages (arts. 271-277) concern the concurrence of procedures, the list of creditors with the inventory of assets and the liquidation programme (art. 272), the formation of the liabilities, the liquidator's actions, the execution of the programme and closure.

And afterwards: discharge

Art. 282 provides that discharge operates at the closure of the procedure or, alternatively, after three years from opening, by reasoned court decree. It does not operate if the debtor has received a final conviction for the offences under art. 344 or caused the over-indebtedness through gross negligence, bad faith or fraud; the decree may be challenged within thirty days (art. 124). On the same conditions: deservingness.

Why the list of assets and creditors matters

The inventory and the list of creditors are the core of art. 272: a forgotten asset or an act not declared in the last five years becomes a credibility problem before the OCC. Checking what appears in your name in the Land Registry (Catasto), the Business Register (Registro Imprese) and the protest registers before filing avoids surprises: this is exactly the cross-check performed by the Over-indebtedness report.

This guide explains the law in general terms and is not legal advice: anyone in over-indebtedness needs a professional who looks at their case and the law currently in force.

Before you see the lawyer, get your case in order: the free questionnaire collects creditors, income, expenses, assets and acts of the last five years; the Over-indebtedness report at 29€ checks them against public data in your name (protests, procedures, encumbrances, positions held, shares, property) and gives you the PDF to hand to the professional. It is not legal advice, nor the OCC report.

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Frequently asked questions

Who can apply for controlled liquidation?

The debtor in over-indebtedness, by petition to the competent court (art. 268, paragraph 1). If the debtor is insolvent, a creditor may also apply.

Is there a debt threshold for a creditor's application?

Yes: the procedure does not open if the matured and unpaid debts resulting from the investigation are below 50,000 euros, an amount periodically updated (art. 268, paragraph 2).

Are salary and pension liquidated?

Salaries, pensions, wages and business earnings are excluded within the limits set by the judge for the maintenance of the debtor and family; non-seizable claims are also excluded (art. 268, paragraph 4).

When can I obtain discharge?

At the closure of the procedure or after three years from its opening, by court decree, if none of the impediments under art. 282 apply (final conviction for the offences under art. 344, gross negligence, bad faith or fraud).

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