Premiere today for the new bankruptcy law and its platform an out-of-court mechanism, (keyd.gov.gr), which means that tens of thousands of debtors are out of protection with loan first home.

However, there are ways to rescue households and businesses from the debt nightmare, as explained by Fotis Kourmousis, Special Secretary for Private Debt Management. «The way to do this is through long-term debt regulation, which for the tax authorities is 20 years (240 instalments) and for banks 35 years (420 instalments),» he continued.

«If one does not manage to follow this path, there is also the alternative route to bankruptcy. In this case, all debts are cancelled and all property is liquidated. However, the first residence may be retained if concerns a vulnerable household. In Greece, before the coronavirus, almost 2/3 of the population were considered vulnerable, based on tax returns», Mr.Kourmousis pointed out to APE.

«The new law 4738/2020 is a harmonisation of the European Directive 1023 of 2019 and provides two possibilities. Either arrange your debts in a sustainable way or write off all your debts through bankruptcy - discharge of debts and thus have a second chance at a fresh start».

Referring to the platform of an out-of-court debt settlement mechanism, which opened today, he stressed: «It enables households and businesses to settle their debts and thus avoid bankruptcy, seizures and auctions. Through the platform, debts to the State (AADE, EFKA, OTA, etc.) are regulated in up to 240 instalments as well as non-performing loans to banks and loan managers in up to 420 instalments. The minimum instalment will be €50 per month. It concerns all debts, whether old or new, existing at the time of application.».

Kia explained the process: «Submission of an application on the platform, generation of an automatic arrangement by an algorithm, vote of the creditors, (the State always votes in favour of the citizen). If the majority of creditors agree against 60%, then they are all obliged to settle.».

Asked if anyone must go bankrupt in order to achieve a settlement of his debts, he replied, «No. On the contrary, debt adjustment avoids bankruptcy, seizures and auctions.».

He also noted that «there is no question of “automatic bankruptcy”. You have to file a petition or you or the creditor to file for bankruptcy. And there has to be a court of law. There is no “automatic bankruptcy”,» he clarified.

In addition, Mr Kourmousis gave answers to important questions, solving every question of the debtors:

Can the bank fail you?;

«Yes, if the conditions of the law are met, i.e. if you are unable to pay, have debts of more than 30,000 euros for more than 6 months».

Will I lose property if I settle?;

«Only if you agree to it, in order to reduce the total debt and thus receive a smaller settlement payment.».

However, is it possible to settle my debts without losing my property?;

«Yes. Through the platform, a debt settlement proposal is automatically generated, which takes into account the value of the property and your disposable income. So, the higher the value of your property, the higher the monthly instalment you will have to pay. Interest is charged on the instalments (State 5% and banks 3,75% per year). You can also choose to pay in fewer instalments to reduce the interest».

The value of a citizen's property sometimes - if not usually any more - does not correspond to his or her income. What then?;

«For the calculation of the instalment, the value of the property is taken into account first and then, if there are high incomes, the instalment is increased accordingly.».

If a citizen has a minimum wage that barely covers reasonable living expenses and therefore has no money left over from his/her income, but has a house worth at least €100,000. Then what happens?;

«For simplicity, let's assume that the house is worth €100,000 and the debt is equal. With the financial data you have provided, the monthly instalment is EUR 240 plus interest, i.e. approximately EUR 350. The instalments are subject to interest (State 5% and banks 3.75% per annum). You can also choose to pay in fewer instalments to reduce the interest. If you cannot cover them, in cooperation with your co-debtors and guarantors (spouses, parents, children, siblings, etc.) then he will have to liquidate part of his assets.».

If he has no family and has only one house? In other words, if he has nothing to part with, but also no one to help him. Then what happens?;

«In practice it is bankrupt because it cannot cover the debt with a long-term arrangement. So it is unsustainable. The law allows him to be discharged from all his debts while liquidating his property. However, although he will lose the property, he has the right to stay in his home on a 12-year lease. In this case, the state will provide a monthly housing allowance to avoid eviction. The citizen has the right to re-purchase the first home if he or she recovers financially.

If bankruptcy means a «haircut» of all debts, what can the regulation be about?;

«Subject to conditions, the «haircut» of debt to the State cannot be more than 95% for fines, 85% for surcharges and interest on late payment and 75% for principal. There is no capital haircut on withheld taxes and social security contributions (such as VAT, FMS). The «haircut» of debt to banks cannot exceed 80% of the capital. There is no maximum haircut limit for interest. These rules apply at European level and have been in all the laws of recent years (Katseli Law, etc.).».

With any existing citizen or business regulations, what will happen?;

«They can be readjusted if the citizen has other unadjusted debts, with the aim of obtaining a comprehensive adjustment for all debts. So, if a person has all his debts already settled, then he cannot readjust them unless events occur that worsen his financial situation by at least 20%. E.g. a decrease in income or an increase in inelastic costs, such as a medical event or a happy event such as having children.»

Who can benefit from this scheme?;

«You must have total debts to all creditors of more than 10 thousand euros, you must not owe only one bank. You need at least two banks. where one cannot have more than 90% of total debt. It is possible to owe only to the State and to make arrangements (e.g. only AADE or EFKA) and finally for debts of large companies with a turnover of more than 2.5 million euros or debts of more than 5 million euros a business plan is required.».