Law 3869/2010
At the onset of the economic crisis, more than 80.000 applications have flooded Greece’s justice of the peace courts in the past six months (December 2018) from individuals seeking to ease the terms of their bank loans. Data from the banks suggest that the number of the settlements made so far cover 800.000 loans, many of which have been restructured more than once and some of which have been classified as non-performing. The debt arises mainly from consumer and business loans without collateral rather than mortgage loans.However, an increasing number of applicants are seeking easier repayment terms even though banks are not entitled to seize their incomes to pay off their debts. Moreover, the flow of applicants after the Katselis Law (3869/2010, as it has been amended by law 4161/2013 and subsequently modified by law 4336/2015) regulates matters concerning the management of debts of highly indebted households.
According to this law, citizens, natural persons, non-merchants who have been found in default, can address to the Greek courts and apply for debt settlement (reduction of monthly installments, reduction of total debt, increase the time of repayment, property protection, etc.). In this way, citizens facing serious financial problems are given the opportunity to pay off properly the installments of their loans without being exposed at the risk of complaints, concerning credit agreements or conditions, seizures, and auctions of their property. This mechanism is indented to give the chance to the debtorsto proceed to the repayment of their dept in a sustainable model and in line with their existing financial capability.
Terms And Conditions Required For Debtors To Be Included In Law 3869/2010
The Greek State provides a method whereby individuals burdened by excessive
debt, can obtain a “fresh start” and pursue productive lives unimpeded by past
financial problems.Law 3869/2010 is an important alternative for persons
strapped with more debt and stress than they can handle. To apply for a debt
relief order, citizens must meet certain eligibility criteria.
To begin with, the debtor should be a natural person (not a corporation or a legal/juridical person) before insolvency proceedings have been opened and not have the ability to pay off his overdue financial debts. It is noteworthy that in the eyes of the law, the borrower of a loan is also considered to be the guarantor of the loan, but he can equally apply separately for debt relief order. Implementation of the law already includes debts to tax authorities, local government and social insurance organizations. In any case, all debts must have been incurred at least one year before filing upthe application. Finally, after the latest amendment to Law 3869/2010, the law envisages that the court may order partial or total cancellation of the debt, if the total debts do not exceedover EUR 20.000 as well as the applicant does not have any real estate or income, and his movable property does not exceed the sum of EUR 1.000.
Actions before filing the application
Deciding to file an application is an important decision and must be considered based on each case’s specific circumstances and what other options are available. Incipiently, there is the possibility -and not the obligation- for the applicant considering a preliminary ruling. This would imply,in more practical terms thatthe applicant may choose, before proceeding to court, to seek for pre- and non-judicial settlement with his creditors.
In this respect and in order to file an application to the Local District Court (Ειρηνοδικείο), the debtorneeds to create documentation files with detailed statements of debts, provided by the credit institutions. These statements must be granted within ten working days of the submission of the application, without any charge for the debtor. Any other way, if the bank exceeds ten working days or a reasonable period of time to issue these statements, this delay could provide the submission of a complaint to the general secretariat of consumer and then they impose a fine between EUR500 and EUR 10.000.
Submitting an application
The application must be accompanied by all the required documents in order to be considered by the Local District Court. From this point and forward, the court sets two dates: the first time is the day of validation of the out-of-court settlement or a request for an interlocutory injunction, while the second time is the final court date.
The application must be clear and detailed, avoiding any ambiguities or deficiencies otherwise it will be annulled, and the debtor would have to submit a new application. From the date on which the application was filed,the claims of private creditors-claims which are secured on a statutory basis in national lawcontinue to be subject of the remuneration until a final decision of the court. Other claims cease upon the notification of the request to produce the legal or conventional interest.
Suspension Of Prosecution Measures
If at the first date there is no compromise and validation of the agreement,
the local district court shall consider the debtor's request for the protection
of his property and may order the suspension of hisexpropriation measures,
provided that he is making the monthly payment to the creditors included in the
application.
The crucial factor in determining the amount of these monthly payments is, on the one hand, to ensure that the applicant can cover hispersonal and his family living costs, and on the other, that he pays at least 10% of the latest updated monthly payments in order torepay his creditors. The living costs are calculated according to the Hellenic Statistical Authority (ΕλληνικήΣτατιστικήΑρχή) and in some exceptional cases, a monthly payment amount can be set to EUR 40 or even to zero amount.
If the debtor delays to pay his monthly payments for more than three months, then the Local District Court may, at the request of a creditor, order the temporary exemption of the interim order, which practically means that the debtor stays unprotected against his creditors.
Debt Settlement
In cases where the Local District Court accepts the borrower's request has basically two alternatives:
a. If the court considers that the debtor has sufficient assets to repay the debt, after deducting the necessary amount to cover his personal and family reasonable living expenses (the necessary amount is calculated each year by the Greek Statistical Authority), it sets a monthly paymentfor a period of 3 years on the basis of all kinds of income of the debtor, in order to satisfy the claims of his creditors.
b. In cases where assets are still available, the court has still two alternatives:
i. If the liquidation of the assets permits, it shall designate a financial manager of the debtor's property during the divestment process in order to maximize its yield for the benefit of the creditors.
ii. From the liquidation of the debtor’s property, the principal residence of the borrower or his only immovable property may be excluded, as long as the following conditions are fulfilled:
The applicant's property for which protection is sought serves as its main residence
His monthly family income does not exceed the reasonable subsistence costs, as determined annually by the Hellenic Statistical Authority, increased by 70%
The estimated value of the main residence, during the evaluations of the application, does not exceed EUR 180.000 for the unmarried debtor, increased by EUR 40.000 for the married debtor and EUR 20.000 per child (up to three children) and finally
The debtor is a compliant borrower, based on the code of ethics for banks.
The repayment period should not exceed twenty years unless the term of the loan agreements is longer but in any case, it cannot exceed thirty-five years. In addition, there is the possibility of submitting the borrower's application to the Greek State to partially cover an amount of its monthly payment. However, the contribution of the Greek State may not exceed three years.
In case the debtor, during the debt settlement plan, delays the payment of four monthly installments per year, either successively or in total, creditors have the option of terminating the settlement by commencing enforcement proceedings against his property.