Redemption of a litigious claim barred in judicial reorganisation

A debtor placed in judicial reorganisation (redressement judiciaire) cannot exercise redemption of a litigious claim (retrait litigieux). Redemption of a litigious claim allows a party, in principle, to be discharged by reimbursing the assignee the actual price of the assignment. The prohibition on paying claims arising before the opening judgment (jugement d'ouverture) bars that possibility, both during the observation period (période d'observation) and after the plan has been adopted. The application is then inadmissible, and the court must raise that inadmissibility, of its own motion if necessary.

Key points

• Redemption of a litigious claim allows the person against whom a litigious right has been assigned to be discharged by reimbursing the assignee the actual price of the assignment, the costs and lawful expenses, and interest.
• The opening of judicial reorganisation automatically entails a prohibition on paying any claim arising before the opening judgment, which deprives the debtor of redemption of a litigious claim.
• That prohibition applies during the observation period and continues after a reorganisation plan has been adopted.
• An application for redemption of a litigious claim made by a debtor subject to insolvency proceedings is inadmissible, and the court must raise this of its own motion if necessary.
• The assignee of a pre-opening claim retains its application for the claim to be fixed in the liabilities (fixation au passif), for the amount filed and not for the price it paid.

A bank claim assigned after the opening of the reorganisation

The commercial chamber holds that the prohibition on paying pre-opening claims deprives a debtor in judicial reorganisation of redemption of a litigious claim (Com., 4 March 2026, No. 24-20.709). In 2008, a bank opened an account for a company with an overdraft facility, then granted it a loan in 2014. Unpaid instalments and the debit balance on the account led the bank to bring proceedings for payment in December 2016. On 12 May 2017, the company was placed in judicial reorganisation and the official receiver (mandataire judiciaire) joined the proceedings. After filing its claim, the bank assigned its claims on 6 July 2017 to a company which voluntarily joined the proceedings.

The decision under appeal (CA Bordeaux, 11 January 2024, No. 21/02948) dismissed the application for the claims to be fixed in the liabilities. The lower court judges held that the claims were litigious and that the debtor company could invoke redemption of the litigious claim against the assignee. The commercial chamber raises of its own motion a ground of appeal based on Article 1699 of the French Civil Code and Article L. 622-7 of the French Commercial Code. The latter provision is applied in its version prior to Ordinance No. 2021-1193 of 15 September 2021, made applicable to judicial reorganisation by Article L. 631-14 of the same code.

The commercial chamber quashes the decision in its entirety and remits the case to the Toulouse court of appeal. The claims had arisen before the opening of the judicial reorganisation on 12 May 2017. Redemption of the litigious claim was invoked for the first time on 4 November 2021. The court of appeal therefore had to raise, of its own motion if necessary, the inadmissibility of that application. The decision states the rule in general terms (free translation):

This prohibition prevents the debtor subject to insolvency proceedings from exercising redemption of a litigious claim, both during the observation period and after the adoption of a reorganisation plan.

Can a debtor in judicial reorganisation exercise redemption of a litigious claim?

No: a debtor in judicial reorganisation cannot be discharged by reimbursing the assignee the price paid for its debt. Redemption of a litigious claim presupposes a payment to the assignee. Yet the opening of the proceedings automatically prohibits payment of claims arising before the opening judgment. The debtor's buy-back of the claim therefore runs directly into that prohibition. The solution applies whatever the date of the assignment, including where the original creditor assigned its claim after the proceedings were opened.

For the purchaser of a portfolio of claims, the consequence is immediate: the discount obtained from the assignor does not benefit the debtor in insolvency proceedings. The assignee pursues the fixing of its claim in the liabilities for the amount filed. The decision does not, however, deprive the debtor company of challenges relating to the existence, the amount or the ancillary elements of the claim. It closes one specific route, that of buy-back at the actual price of the assignment.

The scope of the prohibition during and after the plan

The prohibition covers the whole duration of the proceedings, including the observation period and the performance of the reorganisation plan. The decision under discussion does not merely settle the position during the observation period: it expressly states that the adoption of a reorganisation plan does not reopen the possibility of redemption. The rule is stated on the basis of Article L. 622-7 of the French Commercial Code, in its version prior to the Ordinance of 15 September 2021. As the case law stands on 4 March 2026, a debtor in judicial reorganisation no longer has any argument based on the price paid by the assignee.

According to the decision under appeal, the admission of the claim to the liabilities did not prevent the debtor company from invoking redemption of the litigious claim against the assignee's action, since the claims remained litigious. That reasoning is rejected: the question is not only whether the claim is litigious, but whether the debtor may lawfully pay. The decision rules on a debtor subject to judicial reorganisation; it does not address other situations, in particular redemption exercised by a third party.

What steps for the assignee of a disputed claim?

The first step is to establish the date on which each claim arose in relation to the opening judgment. That date triggers the prohibition on payment and, consequently, the inadmissibility of redemption of the litigious claim. The assignee therefore has an interest in keeping the assignor's filing of its claim, the assignment deed and the full chronology of unpaid amounts. These items support the application for the claim to be fixed in the liabilities and make it possible to defeat the argument based on the purchase price of the portfolio.

For the debtor and the officers of the proceedings, the decision invites a careful assessment of the real value of an application for redemption made after the opening. The court may raise the inadmissibility of its own motion, without waiting for the creditor to do so. The other side's silence therefore offers no security. The useful lines of defence shift towards challenging the claim itself, its amount or its ancillary elements.

Points to check before invoking redemption of a litigious claim

• Check whether the claim arose before or after the opening judgment: the prohibition on payment concerns only pre-opening claims.
• Identify the stage of the proceedings: neither the observation period nor the performance of the reorganisation plan allows the debtor to exercise redemption of a litigious claim.
• Keep the filing of the claim, the assignment deed and the history of unpaid amounts, which support the application for the claim to be fixed in the liabilities.
• Do not rely on the absence of any challenge from the other side, since the court may raise the inadmissibility of the application for redemption of its own motion.
• Where appropriate, redirect the discussion towards the existence and amount of the claim, the only ground the decision leaves open.