Greece Overhauls Debt Mechanism, Enhancing Primary Residence Protection

Greece is set to implement significant changes to its out-of-court debt settlement mechanism on September 21, aiming to provide greater relief and protection for debtors, including homeowners. The revised framework lowers the eligibility threshold for total debts from 10,000 euros to 5,000 euros, allowing more individuals and entrepreneurs to access debt restructuring.

A key feature of the updated mechanism is the enhanced protection for primary residences. Debtors can opt to protect their main home as part of the restructuring agreement. While other assets may need to be liquidated to satisfy creditors, the primary residence is shielded from forced execution as long as the restructuring agreement is adhered to. This compliance acts as a safeguard against foreclosure.

The new regulations also introduce a special six-month period starting September 21, enabling certain debtors to reapply to the mechanism before the standard 12-month waiting period. To be eligible for a review, debtors must demonstrate a significant worsening of their financial situation, at least a 20% decline. Furthermore, those whose previous arrangements were terminated, for instance, due to missed payments, can also reapply within this period.

The debt settlement plan allows for restructuring of public debts over up to 240 installments and bank debts over up to 420 installments. Depending on the debtor's financial and asset situation, debt write-offs could reach as high as approximately 70%. The monthly installment amount is personalized, with each case evaluated based on the debtor's capacity to meet obligations. Debts owed to local government organizations can also be included after being certified by the municipal authority.