With private debt rising at dizzying rates and becoming a major “thorn” for over 1.5 million households and businesses, the government is deploying two key settlement tools – the out-of-court mechanism and the new 72-installment program – to limit the risk of a new generation of “red” debts.
According to the Ministry of National Economy and Finance, the out-of-court mechanism is expanding and will now cover smaller debts, from €5,000 to €10,000, opening the door to approximately 300,000 additional debtors.
Meanwhile, from June, the new 72-installment settlement that the market demanded comes into effect, for old debts that became overdue by the end of 2023. The new settlement “links” with the possibility of lifting bank account seizures, provided 25% of the debt is paid and the remaining amount is settled. This option is provided once and aims to maintain a minimum level of liquidity to cover operational needs, especially for businesses and freelancers.
Double government intervention for debts
As competent officials emphasize, this double intervention is not accidental, but aims to cover different “speeds” of debtors: from those who need an immediate, simple settlement to those in deeper financial difficulty seeking comprehensive restructuring of their obligations. The challenge, however, remains mass enrollment and – crucially – consistent compliance with settlements, in a context where data shows that only 6.65% of the actual overdue balance is currently in active settlement. This means the success of new interventions will be judged not only by the interest shown, but also by whether debtors can remain compliant, so settlements are sustainable and the problem of overdue debts doesn’t recycle in coming months.
The important thing is that both settlement schemes will run in parallel, with the basic difference being they target different debtor profiles, making the choice a real “crash test” for which solution is ultimately more beneficial and – crucially – more sustainable long-term.
In detail:
Out-of-court mechanism: Covers debts from €5,000 and above (versus the previous €10,000 threshold) to banks, the State and insurance funds, meaning smaller debts up to €4,999 are not included in this framework. Settlement is determined through an algorithm considering the debtor’s income and assets. It offers long repayment periods, which in some cases reach or exceed 240 installments. It may also include debt “haircuts” depending on financial circumstances. The settlement comes with approximately 3% interest applied to the settled debt balance. The out-of-court mechanism is mainly suitable for large debts and cases requiring comprehensive debt restructuring.
72-installment settlement: The 72-installment settlement is the most “light” option, covering old, unregulated debts that became overdue by 31/12/2023. It requires regularization of any newer debts, meaning for a debtor to qualify they must either have paid debts created from January 1, 2024 to today or already settled them through the standing 24-48 installment arrangement. A deterrent factor for this settlement is the interest rate, which burdens the debt balance at 5.84%.
