The new regulation of the out-of-court settlement mechanism, announced by the Minister of National Economy and Finance, Kyriakos Pierrakakis, is primarily aimed at debtors with more than one asset. For the first time, it allows the separation of the primary residence from the rest of the property, enabling its protection under more favorable terms.
Until now, under the out-of-court mechanism, all of a debtor’s real estate and income were assessed collectively, meaning that the existence of additional assets increased the monthly installment and limited the potential debt write-off. Even if someone wished to protect only their main residence, they could not isolate it from their other assets.
Under the new framework, the debtor can choose to safeguard exclusively their primary residence, while the remaining properties will be liquidated through electronic auctions. The restructuring will now be calculated based on the value of the main residence—either commercial or taxable (objective) value, whichever is higher—rather than on the total value of assets.
The out-of-court mechanism is a process for restructuring debts (to banks, the State—e.g. the Independent Authority for Public Revenue (AADE)—and social security institutions, e.g. EFKA) without going through court.
This leads to lower monthly installments and greater scope for debt write-offs, particularly when the value of the residence is lower than the total debt, as the restructuring will be determined in relation to that value and the total amount owed to financial institutions. By contrast, for those who own only one residence, the change does not bring any substantial difference.
The process remains the same: the debtor submits an application, receives a restructuring proposal generated by an algorithm, and chooses whether to accept it, with the main condition being compliance with the repayment terms and the liquidation of the remaining assets.
Sources: Κathimerini, ProtoThema
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