Principal residence and judicial liquidation: the burden of proof falls on the entrepreneur

To benefit from the protection offered by the law, a debtor wishing to assert the unseizability of the property whose sale is required as part of a judicial liquidation must prove that it was his principal residence on the date of the judgment opening the collective proceedings.


Main residence protected in the event of receivership

In accordance with Law 2022-172 of February 14, 2022 for independent professional activity, sole traders benefit from a separation of their personal and professional assets. This means that, in the event of business debts, personal assets, including the principal residence, cannot be seized by creditors.

More specifically, the part of the property not used for business purposes is protected from prosecution by professional creditors. If part of the property is used for business purposes, the part used for residential purposes is exempt from seizure. However, if the entrepreneur lives in his own home, the part of his main residence used for business purposes is subject to seizure by creditors.

In addition to this protection for the principal residence, other built or unbuilt property not used for business purposes can be protected by a declaration of unseizability.

Prove that the property is your principal residence

In the event of insolvency proceedings, and in particular compulsory liquidation, the liquidator is not entitled to sell the property constituting the entrepreneur's principal residence. The difficulty lies in proving this.

In this case, a sole trader selling costume jewelry was placed in receivership and then liquidation by the mixed commercial court. At the request of the liquidator, the official receiver ordered the sale by auction of one of his properties. The entrepreneur opposed the sale, arguing that it was his principal residence.

Initially, the Court of Appeal ruled that the property in question did not constitute the sole trader's principal residence, as it was located in a département other than that in which the business was run. It therefore ruled that the property could be seized by creditors. Following this decision, the entrepreneur appealed to the French Supreme Court.

In the end, the Cour de cassation (French Supreme Court) disagreed with the company director, considering that he had been unable to prove that the property for sale was his principal residence.

In this ruling handed down on June 14, 2023, the French Supreme Court (Cour de cassation) reiterates that it is up to the entrepreneur to prove that the property for sale was his principal residence on the day of the judgment opening the judicial liquidation proceedings. If this is not the case, the property may be seized by creditors.