Extrajudicial Debt Settlement Mechanism with the new bankruptcy law 4738/2020
The Extrajudicial Debt Settlement Mechanism is an extrajudicial procedure for settling monetary debts to the State, Social Security Agencies and Financial Institutions. Financial institutions are understood as credit or financial institutions, including those under special liquidation, leasing companies, business receivables agency companies, loan and credit management companies under Article 1 of Law 4354/2015, acting on behalf of persons who have obtained loans and credits under article 1 of Law 4354/2015, as long as they are under the supervision of the Bank of Greece or the Unified Supervisory Mechanism, as well as the legal persons who obtain claims for Securitization.
The Extrajudicial Debt Settlement Mechanism aims to provide creditors with an operational environment for formulating debt settlement proposals for each debtor, with the aim of avoiding bankruptcy. The law gives the possibility of freely shaping the settlement of debts to financial institutions, without setting a limit on the number of installments of the settlement.
However, for the repayment of debts to the State and the Social Security Agencies, a maximum of two hundred and forty (240) installments is set.
In addition, in the event that the solution offered by the financial institutions results from the counter-proposal of the creditors, i.e. beyond the automated process, a maximum limit of 420 installments is provided for secured loans of individuals, 240 installments for unsecured loans of individuals and secured loans of legal entities and 180 installments for unsecured corporate loans.
The initiative for a debtor to join the Extrajudicial Debt Settlement Mechanism is either the debtor himself or the financial institutions. Financial institutions are not required to submit debt settlement proposals, nor are they bound by the content of their proposal.
The State, the Social Security Institutions or the financial institutions can, as creditors, initiate the extrajudicial debt settlement process by notifying the debtor by electronic letter or by a bailiff or by registered letter or by an equivalent type of postal letter or personal delivery, as long as they are ensured in an equivalent way the confirmation of dispatch, receipt and confidentiality, invitation for the out-of-court restructuring of his debts setting a deadline for submission to the EGDIX platform up to 45 calendar days. The invitation of the previous paragraph is notified by the creditor and to EGDIX. The non-submission of an application by the debtor within the above deadline implies the automatic termination of the procedure and is evaluated in case of subsequent submission of an application under this article by the debtor.
Any natural or legal person with bankruptcy capacity can apply for out-of-court settlement of debts. But there are specific exceptions and limitations.
