New Bill Introduces Major Reforms to Debt Management and Borrower Protection Framework

The legislation includes a provision for the restructuring of loans that have been guaranteed by the Greek state.

A new legislative proposal in Greece is set to introduce major reforms to the country's debt management and borrower protection framework. The bill aims to strengthen debtors' rights while preventing the social and

economic consequences of over-indebtedness. By expanding access to debt settlement mechanisms, increasing transparency in foreclosure procedures, and providing new options for restructuring financial obligations, the legislation seeks to create a more balanced and sustainable system for borrowers and lenders alike.

One of the most significant changes involves doubling the income and asset thresholds for individuals eligible for the out-of-court debt settlement mechanism. This means that more borrowers will now qualify for favorable repayment terms, with the upper limits adjusted based on household composition. Additionally, the maximum allowable savings for debtors will be increased, making it easier for more families to access much-needed financial relief.

Another key provision mandates that creditors must send borrowers a written settlement proposal at least three months before any foreclosure proceedings take place. This measure is designed to ensure that debtors receive timely notification and have an opportunity to explore alternative solutions before losing their properties. In an effort to streamline communication, creditors will also be required to offer electronic notifications to guarantee immediate access to critical information.

The bill also introduces a provision allowing debt relief for individuals who are not undergoing bankruptcy but are listed in the Solvency Registry. Under this new rule, a judge may approve a request for debt discharge, offering a fresh start to those who have no realistic means of repaying their outstanding obligations.

Additionally, the current 60-day deadline for applying to the Public Contribution Program, a government initiative that supports vulnerable debtors, will be abolished. Instead, the interim program will be extended for four months, giving borrowers additional time to complete the necessary procedures. This extension is particularly important as it aligns with the efforts of the newly established Acquisition and Leaseback Entity, which will play a crucial role in managing properties of indebted homeowners.

The legislation also includes a provision for the restructuring of loans that have been guaranteed by the Greek state. Under this new framework, businesses with significant debt burdens will be able to renegotiate their liabilities while maintaining state guarantees. This change is expected to provide financially struggling companies with a better chance of securing a sustainable repayment plan while preserving financial stability.

To illustrate the impact of these reforms, consider a four-member family in Greece with an annual income of €30,000 and a primary residence valued at €120,000. Under the previous system, they were ineligible for the out-of-court debt settlement mechanism because their income and assets exceeded the limits. With the new regulations doubling the thresholds, they will now be able to apply for a structured repayment plan, avoiding harsher measures such as property seizure.

For borrowers facing foreclosure due to prolonged mortgage arrears, the new requirement for banks to provide a written settlement offer three months in advance could be life-changing. Previously, individuals in this situation had little opportunity to renegotiate their debt before losing their homes. Now, they will have time to explore repayment options, seek legal assistance, or apply for financial support programs.

Similarly, a self-employed professional who accumulated debt during the COVID-19 pandemic and never managed to recover financially will have a new option. Rather than declaring bankruptcy, they can now register in the Solvency Registry and petition the court for debt relief if repayment is deemed impossible.

The reforms also extend protections for pensioners. In the past, a low-income retiree who missed the strict 60-day deadline for applying to the Public Contribution Program risked losing their home to foreclosure. With the new legislation, that deadline is removed, and the program is extended, giving pensioners more time to apply for assistance and secure government support.
For small businesses, the changes could be particularly impactful. A company that took out a state-backed loan but later struggled with repayments due to rising operational costs previously faced complex renegotiation processes that often resulted in the loss of the government guarantee. Now, these businesses will be able to enter financial rehabilitation, restructure their debt, and retain the state guarantee, improving their chances of securing a manageable repayment plan.

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