The protection shield for the primary residence of over-indebted households is being strengthened, along with the safety net specifically for vulnerable borrowers. Starting September 21, the electronic platform of the out-of-court debt settlement mechanism will activate a new feature allowing debtors to submit a restructuring application that separates their primary residence from the rest of their real estate assets. From this point forward, a debtor entering the out-of-court mechanism will be able to choose to protect only their primary residence. In this case, the mechanism’s algorithm will factor in only the value of the primary residence being saved — not the remaining assets, which will need to be liquidated.
As a result, the monthly installment and debt write-downs achieved by the debtor will be substantially improved, reflecting only the value of the residence and the debtor’s income. The primary residence will be saved, while all other assets will be sold through an electronic auction process. The debtor will thus benefit from significant debt write-downs and a lower monthly payment in the proposed restructuring agreement — provided, of course, that the property’s value is lower than the total amount owed to financial institutions (banks and servicers).
Out-of-court mechanism: The electronic platform algorithm is changing
Specifically, if the debtor opts in, the out-of-court mechanism’s platform algorithm will take into account only the value of the primary residence when generating the proposed settlement. The property value used will be as already defined in the out-of-court law — that is, the higher of either the commercial value declared by the creditor in the system or the ENFIA (property tax) assessed value.
The proposal will include the sale of the debtor’s other properties (excluding the primary residence). This liquidation will be incorporated as a term in the restructuring agreement and will be carried out electronically through the e-auction process. The date of sale is set within a window of 40 to 60 days from the drafting of the relevant report, excluding the month of August. It should be noted that the debtor will have the right to either reject or accept the proposal generated by the algorithm. If accepted, the restructuring agreement will be drawn up with the above characteristics — a monthly installment for the protection of the primary residence, provided it is maintained, alongside the liquidation of other properties.
For the duration of the agreement, the participating creditors will not be able to pursue enforcement proceedings, obtain interim measures, or register a new mortgage on the debtor’s primary residence. Should the debtor default on the terms, the protection is automatically lifted.
Example
Under the out-of-court mechanism’s new primary residence protection option, consider a debtor with €200,000 in debt, a primary residence valued at €120,000, and a vacation home valued at €80,000. Until now, the out-of-court algorithm calculated the settlement based on a total debt of €200,000 against total assets worth €200,000 — meaning no debt write-down was possible.
Now, the €200,000 debt will be restructured based on the €120,000 value of the primary residence and will receive a write-down, while the secondary property will be sold. The restructuring agreement will be generated automatically by the system once the debtor selects the option to save only the primary residence, and the auction process for the secondary assets will proceed without requiring a payment order or seizure notice — procedures that typically take around seven months.
Until now, the sale of secondary properties through auction was often not feasible — due to, for example, failure to find a buyer — which significantly burdened the proposed restructuring settlement for the debtor. This was a major obstacle for those carrying debt who wished to settle it while protecting their primary home.
It is worth noting that since July 27, the out-of-court mechanism has already been available for debts from €5,000 upward, targeting more than 1,000,000 small debtors with obligations to the tax authority (AADE) and social security (EFKA), or consumer loans. Since July 18, the AADE platform has also been activated for enrolling debts into the new settlement scheme of up to 72 installments, covering debts to the state that became overdue up to December 31, 2023.
Applications are submitted electronically through the myAADE platform until December 31, 2026. In total, by the end of July, 66,578 settlements had been completed through the out-of-court mechanism’s platform, corresponding to original debts amounting to €20.19 billion. The total debt write-downs granted by the out-of-court mechanism platform — covering obligations to the state, banks, and servicers — amount to €6.53 billion.
*Published in Apogevmatini tis Kyriakis
