With the new law the procedures will be simpler and faster than all previous debt settlement regimes. See the whole process step by step.
The new framework for settling debts and providing a second chance will be the corrected and improved in many places "Katseli Law" of the 2020s.
A holistic solution that promises that from the beginning of 2021 it will provide for the settlement of overdue debts in the public and private sectors either through an out-of-court settlement with creditors or through bankruptcy.
In the second case, that of bankruptcy, that is, as soon as all the assets of a natural or legal person are liquidated in a period of 1 to a maximum of 3 years, he is freed from all debts and will be able to make a new start. The benefit claimed by the new law, which was put out for consultation yesterday, is that the procedures will be simpler and faster than all previous debt settlement regimes, including the Katseli Act.
The procedure for natural persons will be as follows:
1. Debtors to Banks, debt settlement companies (servicers), tax authorities, EFKA, municipalities will initially submit an application to the electronic platform that will be opened for this reason requesting out-of-court settlement of debts.
2. This application will be sent to private creditors. If the majority of them accept the interested party's application, then all the creditors must agree on a settlement proposal no later than within 2 months of the interested party's application.
3. As soon as there is a positive response from the creditors, auctions and foreclosures stop. If the debtor accepts the creditors' proposal, his debts are settled and he begins to pay them under the agreed terms. If the debtor belongs to a financially vulnerable household that does not can cover the installment of the debts arising from the settlement, then it will also have a government subsidy on the installment.
4. If the creditors do not accept the arrangement in two months, then the application is rejected as fruitless and the interested party has the only recourse to the courts.
Bankruptcy of an individual
In the event that the debtor cannot follow a debt settlement program due to an objective inability (e.g. job loss), then either he or his creditors, or a court of first instance, may declare him bankrupt. The new law provides for a simplified procedure for "small item" bankruptcy. From now on:
1. Any property of the debtor is transferred to a certified insolvency administrator, who takes over the debtor's assets, liquidates them, collects the creditors' claims and distributes the amounts resulting from the liquidation to the creditors
2. Debtors whose main residence will be liquidated or other assets that exceed 10% of their obligations and are worth at least 100,000 are exempt from all their remaining debts. For those who do not liquidate any of their assets then they are finally released from their debts in three years.
Financially vulnerable households that will reach bankruptcy and the liquidation of the 1st residence, then the State intervenes in order to avoid eviction. At the liquidation stage by the creditors, substantial support is provided by the state, through the creation of a private body for the acquisition of the properties, which will be selected by the State, through a competitive process.
The body in question will be required to acquire the property that constitutes the 1st residence of vulnerable social groups, which has been launched in an auction process, following a declaration of bankruptcy or forced execution. In addition, the agency is obliged to grant the residence for use to the vulnerable household for 12 years, following the payment of rent, which will be supported by the State, in the form of a rent allowance. Thus, an eviction that would occur if a third party acquired the property is avoided. Also, the institution is obliged to offer the debtor the possibility to reacquire the property within 12 years.
Settlement of business debts
In the case of businesses there are two possibilities with the new law.
The first is to submit an application for out-of-court settlement of debts similar to that of individuals
As for individuals, the application is sent electronically to the financial institutions (banks & servicers). Here, too, the majority of creditors (banks & servicers) need to consent, in order to start the process.
In the event that the majority of creditors agree to consider the application:
- Suspension of foreclosures and auctions is provided.
- A total debt settlement proposal is provided, which results from a calculation tool. If there is no debt to the State, then the servicer banks can submit another proposal, without the calculation tool. Alternatively, they can mediate.
In case of refusal to consider the application by the majority of creditors:
- The out-of-court debt settlement procedure does not proceed and the application is rejected as fruitless.
The second option given to over-indebted companies is to join the consolidation process. In this case, the consent of two categories of creditors is needed, those with real collateral and the remaining creditors, at a rate of 50% of each category
An agreement is only reached if 60% of creditors of all categories agree to a debt settlement proposal. The agreement must be ratified by the Court. By submitting the application to the court, a suspension of seizures and auctions is provided by the secured creditors.
The dissenting creditors are bound by the agreement, as long as the basic principle of non-deterioration and equal treatment of creditors is satisfied.
The rights of the employees are not affected by the resolution agreement and their claims are not occupied by the suspension of stalking measures.
Business bankruptcy
In the case of corporate bankruptcy, the same steps are followed as for individuals.
The debtor, his creditors or a court of first instance declares the business bankrupt.
With the decision to declare bankruptcy, it is decided to liquidate either the entire business or its individual assets.
If the sale as a whole is not achieved within 18 months, then the individual assets are sold.
Once the liquidation of the assets is completed, the company is released from its remaining debts either three years after the bankruptcy application or 2 years after the declaration of bankruptcy.
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