The bankruptcy law, through out-of-court debt settlement, allows individuals to settle debts owed to the government, banks, social security funds, local government agencies, and third-party creditors in up to 240 installments is provided by the bankruptcy law through out-of-court debt settlement for small and medium-sized enterprises, self-employed professionals, and households. The online application submission platform will go live on June 1, operated by the General Secretariat for Public Debt Management.
Under the new mechanism, both businesses and individuals will declare where and to whom they owe money, along with the assets they hold and their financial figures; based on an algorithm, the amount of the «haircut» (of the total debt). Subsequently, installment payments will be determined for the remaining total debt.
Debts that are not yet in arrears may also be included in the process, provided that debtors can demonstrate that they are having difficulty repaying these debts and provided that their income has decreased by at least 20%. A prerequisite is that these debts exceed 10,000 euros and are not owed to a single entity for 90%.
In detail:
1. Who is eligible to restructure their debts?;
Starting June 1, businesses, self-employed individuals, and households with outstanding debts will be able to...
2. What options will debtors have through the out-of-court debt settlement mechanism?;
Debtors will have three options: submitting an application through the new online platform and, accordingly, reaching a settlement using the new calculation tool, an automated process; or resorting to mediation and a settlement process by agreement—that is, a collaboration between the debtor and creditors, ratified by the Court of First Instance.
3. Can the debtor choose the number of installments?;
No, the debtor cannot choose. The installments are determined by a special algorithm (i.e., an automated calculation tool) that assesses the debtor’s financial situation (i.e., income and assets).
4. Do banks have a limit of 240 installments under the out-of-court repayment plan, or can they offer more installments?;
Banks may also offer more installments. The number of installments in the debt settlement proposal from banks and loan servicers is determined by additional factors, such as age, repayment capacity, and assets, of both the debtor and their guarantors
5. If the debtor owes money to only one bank, will he or she be eligible for the out-of-court settlement process?;
No. If someone owes money to only one bank, then they should contact that bank and settle their debts directly, in accordance with Law 4224/2013 on the Code of Conduct for Banks.
6. If the debtor owes money only to the government, will he or she be eligible for the out-of-court settlement process?;
If the debtor owes money to only one creditor—for example, only to the tax authorities, or only to social security funds, or to municipalities—then he or she is not eligible for the out-of-court debt settlement mechanism. In this case, they must contact that single creditor and settle their debts directly, in accordance with the applicable provisions on debt settlement (e.g., a standard settlement plan in 24–48 installments). However, if they owe money to two creditors, they may participate in the out-of-court settlement process.
7. Is it necessary to have an expert prepare a report and draft a debt restructuring agreement?;
Yes. This report should include, among other things, the debtor’s profile, the company’s current financial situation, the debtor’s debts by creditor category, an overview of the business plan, a financial viability analysis, the conduct of audits and verifications, alternative solutions for settling the company’s debts, and the basic principles of the proposed restructuring agreement.
All approved experts are listed in the special Registry of Debt Restructuring Experts maintained by the Special Secretariat for Private Debt Management of the Ministry of Finance (www.keyd.gov.gr ή www.gov.gr), from which interested debtors may select an expert to initiate the restructuring process.
8. What exceptions and restrictions apply to participation in the Out-of-Court Debt Settlement Mechanism? The following are not eligible to participate in the out-of-court debt settlement mechanism:
- Investment service providers and branches of foreign investment service providers operating in Greece,
- Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs), as well as their managers,
- Credit and financial institutions, as well as branches of foreign credit or financial institutions operating in Greece,
- Insurance or reinsurance companies.
Furthermore, an application to participate in the out-of-court debt settlement process is not permitted if:
a) at least ninety percent (90%) of the debtor’s total debts to financial institutions, to the State and to Social Security Agencies is owed to a single financial institution, or the total amount of the debtor’s debts to these entities does not exceed ten thousand (10,000) euros,
(b) the debtor has filed a petition with the competent court for the approval of a reorganization agreement, for a declaration of bankruptcy, or for admission to the proceedings under Law 3588/2007 (A’ 153), or Law 3869/2010 (A’ 130), or Law 4605/2019 (A’ 52), or Law 4469/2017 (A’ 62), unless the debtor has validly withdrawn from such proceedings by the date of filing the application for admission to the out-of-court debt settlement procedure,
(c) the debtor has been dissolved or is in liquidation,
(d) a final decision has been issued placing the debtor under one of the proceedings referred to in subparagraph (b) or under the proceedings provided for in Article 68 of Law 4307/2015, or the application for inclusion in the aforementioned proceedings has been heard before the competent court and a judicial decision is pending, or fifteen (15) at least fifteen (15) months have elapsed since the decision to enter the proceedings, or at least twelve (12) months have not elapsed since the completion, in any manner, of the proceedings under the Out-of-Court Settlement Mechanism
(e) any natural person, as well as any person authorized to manage a legal entity by law, by private agreement, or by court order, and in particular one who holds the position of president, managing director, administrator, or partner, has been convicted by a final judgment of one of the following offenses: (i) tax evasion, (ii) money laundering, embezzlement, extortion, forgery, bribery, accepting bribes, smuggling, defrauding creditors, or bankruptcy
9. What information must the debtor’s application contain?;
A debtor’s application for an out-of-court settlement of his or her debts must include the following:
- the debtor’s full details, a statement of the debtor’s turnover or income for the last fiscal year prior to the filing of the application, and a statement of the debtor’s total obligations to its creditors, a description of the debtor’s business activities, financial situation, the reasons for their financial distress, and the prospects for their business,
- a list of all individuals and entities that have claims against the debtor (e.g., suppliers or employees) with full details of the amounts owed to each creditor and the date on which the amount of each debt is determined,
- list of the debtor's movable and immovable assets in Greece and abroad, based on the estimated market value of the movable assets, so that the liquidation value of his assets can be determined.
- a complete description of encumbrances and other security interests (type of encumbrance or security, creditor, secured amount, priority, public registry) registered on the debtor’s assets. e. a statement regarding any transfer or encumbrance of the debtor’s assets that occurred within the last five (5) years prior to the filing of the application.
If the debtor is a natural person, the following documents must also be submitted:
- Full details of the spouse and his or her dependents (full name, Tax Identification Number, Business Classification Code if engaged in business activities, phone number, email address).
- a list of movable and immovable assets in Greece and abroad, including the estimated market value of movable assets for the spouse or partner and any dependents.
- The applicant's family income from any source and for any reason.
10. If someone has reached a repayment agreement on their loan, can they file for an out-of-court settlement to settle their debts with the tax authorities and social security funds?;
Unfortunately, no, because when filing for an out-of-court settlement, it is mandatory to settle all debts owed to creditors.
