Protecting real estate from attachment

Individual entrepreneurs can protect their assets so as to ensure that a business bankruptcy does not lead to personal bankruptcy, by making their real estate exempt from attachment.

What type of property can be protected?
- Any immovable property, whether built or undeveloped, that is not used for a professional use other than the principal residence of the contractor, which is exempt from taxation (secondary residence, land, etc.) can be made exempt from attachment, rental property, i.e. steps can be taken to ensure that it cannot be made the subject of an attachment order.
Who can declare a property exempt?
- Any individual who is registered on a professional register set up for public disclosure purposes (trade and companies register, trade directory, register of companies engaged in inland water transport) and individuals who carry on an agricultural or independent business activity can declare property to be exempt from attachment.
- This possibility is open to traders, artisans, sales agents, farmers, members of accredited professions and persons who carry on a business on a self-employed basis or with the status of a limited liability individual entrepreneur (EIRL).
- Companies, however, of whatever kind, cannot take advantage of this possibility.
What steps have to be taken?
- The procedure is simple and inexpensive.
- The declaration of exemption from attachment is prepared by a notaire, registered at the land registry and mentioned in a professional register set up for public disclosure purposes (trade directory, registry of the commercial court, etc.) or in a journal of legal announcements in the case of individuals who are not required to be registered (such as farmers).

How far does the protection extend?
- The property or properties become exempt from attachment solely vis-à-vis the entrepreneur's professional creditors and with respect to professional debts that arose after the declaration was made public.

How long does the protection last?
- The effects of the declaration of exemption from attachment cease when:
- - The entrepreneur decides to revoke the declaration;
- - The entrepreneur sells their asset. The exemption from attachment continues and applies to the sale price if it is reused within a period of one year, provided the entrepreneur makes a declaration showing the re-use of the funds. The new property then becomes exempt from attachment, within the limit of the amount generated by the sale of the previous property;
- - The entrepreneur dies.
- In the event of divorce, the effects of the declaration continue when the property is allocated to the entrepreneur.

Are there any other ways to protect one's property?
- Yes, by adopting limited liability individual entrepreneur (EIRL) status, it is possible to distinguish between their personal and professional property. The entrepreneur continues to own all their property. They are protected as only the professional assets used for the purposes of the business constitute a guarantee for professional creditors.

What are the limits of the protection?
- In certain cases the protection of an individual's personal assets has proved to be illusory insofar as certain creditors, particularly banks, often require a company director to offer their personal property as a guarantee.
- In the event of legal proceedings involving mismanagement, the courts may also hold the directors liable, hence the importance of choosing one's matrimonial property regime with care and the advantage, in some cases, of adopting the matrimonial property regime in which the spouses hold their property separately.