En Désastre - General
When a person or corporate person is unable to pay his debts he is said to be en etat de désastre in that his current liabilities exceed the value of his assets. Désastre allows all the creditors to share the proceeds of sale of a debtor's chattels, as opposed to a single creditor liquidating assets entirely for their benefit. Désastre is not equivalent to a bankruptcy order. Neither does désastre constitute a discharge for the debtor from his liabilities. Creditors may continue to pursue the debtor for the remainder of the debt should assets of the debtor appear after the initial désastre.
It is at this point that the désastre procedure is initiated when the Sheriff has insufficient funds to cover the judgment and non judgment debts notified to him. If the proceeds of the sale will in fact satisfy the arresting creditor's debt and the other judgment debts those creditors will be paid in full.
However if there are insufficient funds to satisfy the debts notified the court will order the arresting creditor, the debtor and other creditors to appear before a Jurat appointed by the Court to act as commissioner for the purpose of establishing the claims and any preferences. An initial meeting between the arresting creditor, the Sheriff and the commissioner is called and the Sheriff confirms to the Commissioner that the proceeds of the sale are insufficient to satisfy the debts of which he is aware. A date is fixed when the Commissioner will examine the claims and preferences and declare what dividend is to be paid from the monies in the possession of the Sheriff.
The arresting creditor must give notice of the creditors meeting on two occasions in the Gazette officielle as well as in the Royal Court Building.
The arresting creditor's advocate takes the initiative and leads the proceedings of the creditors meeting. Each creditor has the opportunity to represent their claim to the Commissioner, and any disputes to the debt claimed can be challenged by any other person present at the meeting.
Priority of debts
Costs - The desastre costs themselves have the highest priority ie HM Sheriff's fees, any other costs realised in raising the sums to be distributed and the legal costs of the creditor
Then so-called preferred debts are identified. Preferred debts are set out in the Preferred Debts (Guernsey) Law 1983.
At the end of the creditor's meeting an estimate will be made of the dividend payable to the various categories of creditor. The commissioner must make a report to the Royal Court and orders the Sheriff to make the relevant payments to the creditors.