New relief measures for debtors: Primary residence protection and access to out-of-court mechanism for smaller-scale liabilities

The legislative amendment introducing improvements to Greece’s private debt management framework, with a special focus on the protection of primary residences and the sustainable restructuring of liabilities, is expected to be passed in June.

The two main improvements concerning the Out-of-Court Settlement Mechanism are expected to be implemented as follows:

• One month after the legislation is passed, namely in July, the minimum debt threshold for accessing the mechanism will be reduced to 5,000 euros from 10,000 euros.
• Two months later, in August, debtors will be able to opt for the protection of their primary residence separately from the rest of their assets.

According to competent sources, this timeline concerns the full implementation of the changes relating to the Out-of-Court Settlement Mechanism. Through these improvements, debtors will be given the opportunity to repay the value of their primary residence and preserve ownership of it, while simultaneously liquidating secondary properties. At the same time, lowering the debt threshold to 5,000 euros is expected to provide access to more than one million debtors with smaller-scale liabilities who until now were unable to apply to the mechanism.

Primary Residence Protection

For the first time, debtors applying for debt restructuring through the Out-of-Court Settlement platform and opting for primary residence protection will have the amount of debt write-downs and monthly installments calculated exclusively on the basis of the value of the residence and the debtor’s income, rather than on the basis of their total asset portfolio. This is expected to lead to substantially improved restructuring terms.

The option to retain the primary residence while liquidating other assets through electronic auctions for debt repayment is being presented as a “second chance” for debtors.

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Debtors will have the option either to accept or reject the proposed restructuring arrangement. In the event of acceptance, an agreement will be signed providing for the gradual repayment of the value of the primary residence, while its retention will depend on the debtor’s consistent compliance with the agreed terms.

Minimum Debt Threshold Reduced to 5,000 euros

The minimum debt threshold for inclusion in the Out-of-Court Settlement Mechanism will be reduced from 10,000 euros to 5,000 euros, thereby facilitating access for a significant number of debtors, potentially reaching one million individuals. Eligible liabilities include debts owed to banks, social security funds, and tax authorities.

For example, an individual owing 8,000 euros to a bank will be able to repay the amount in up to 250 installments. It is noted that the number of installments will be determined based on the debtor’s financial and asset situation.

In April, 2,172 new restructuring agreements were concluded through the Out-of-Court Settlement Mechanism, involving initial debts amounting to 588 million euros, representing a 51% increase compared with last April.

According to the Ministry of National Economy and Finance, this increase is mainly attributed to recent legislative initiatives and the broader eligibility criteria for inclusion in the mechanism, enabling more citizens to restructure their debts and safeguard their assets.

Since the launch of the Out-of-Court Settlement platform, a total of 60,388 agreements have been successfully completed, corresponding to initial liabilities amounting to 18.64 billion euros.