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Debt enforcement and bankruptcy law: All you need to know about IOUs (art. 82 LP) 

    What is an IOU?

    IOUs play an important role in a debt situation, when a debtor does not pay his bills and legal action must hence be taken. 

    It is a written and signed document in which the debtor acknowledges that he owes a certain amount of money or a certain quantity of goods to his creditor.

    An invoice alone is not enough to prove an outstanding debt. The law requires an act by which the debtor makes an unconditional promise to pay or discharge his debt. The document must include: 

    – A handwritten signature; 

    – The quantified owed amount (preferably in Swiss francs). 

    Please note that mentioning a term of payment is very advisable, at the risk of ending up with an indefinite promise!

     Only when the period set by the creditor expires will the acknowledgement of debt (the IOU) become valid. 

    What is the purpose of an IOU?

    In Switzerland, it is the case law that defines the acknowledgement of debt: “The creditor, whose claim is based on an acknowledgement of debt established by an authentic instrument or under private signature, may request the provisional release of the opposition.”

     If A owes money to B, and B sends a summons to pay to A through the prosecution office, B may use the IOU signed by A to carry out a release procedure, if A objects. 

    The debt acknowledgment then takes on its full value, as the provisional release for the debtor’s opposition is a simple, quick and inexpensive procedure for the creditor, and avoids lengthy and costly legal proceedings. 

    For safety, it is therefore important to establish an IOU at the beginning of the contractual relationship between creditor and debtor.

    Download your IOU template or let Lawrence write it for you!

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