The 3 Big 'Traps' of the Out-of-Court Mechanism: When Regulations 'Capsize' Over a Single Document

The out-of-court mechanism for regulating debts is once again under scrutiny, particularly following a recent Supreme Court decision concerning the management of non-performing loans. While established as a primary tool for debt restructuring, its effectiveness is being questioned by legal professionals who point to specific shortcomings. Lawyer Zannis Sideris highlights that the system's implementation reveals serious issues impeding successful debt resolutions. Borrowers frequently encounter installment proposals that are disproportionate to their income, even impacting vulnerable debtors. Additionally, the public sector imposes rigid deadlines for issuing certificates, and complex technical requirements, such as the "unification" of properties on the electronic platform, add further hurdles.

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Often, the platform proposes a total monthly installment that exceeds even the borrower's total income. This problem affects even the vulnerable debtor category. Despite the prevailing belief that the 'Vulnerable Debtor Certificate' ensures a regulation 'tailored to them,' in practice, proposals emerge that are deemed completely unviable.

One major pitfall is the unrealistic installment proposals. Sideris notes that the platform sometimes suggests total monthly installments exceeding a borrower's entire income, a problem that affects even vulnerable debtors. Despite the belief that a "vulnerable debtor" certificate guarantees a tailored arrangement, the reality often involves unfeasible proposals. The law, as it stands, does not obligate funds or banks to create a sustainable arrangement; they are only required to submit a proposal, without legal commitment to its content. This allows creditors to propose seemingly unworkable solutions while remaining compliant with the existing framework.

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From the letter of the law, there is no obligation for funds or banks to draft a sustainable arrangement. Creditors are only obliged to submit a proposal, without being legally bound by its content. Thus, even if they make a clearly unworkable proposal, they are fully covered by the existing framework.

Another significant obstacle arises from the actions of the Greek Public Revenue Authority and the EFKA social security fund. Sideris explains that even when the public sector's debt constitutes only a small fraction of the total, it can disrupt an overall agreement. This practice involves tax and social security services requesting further documentation and imposing a strict five-day deadline for submission. This timeframe is often objectively impossible to meet, as the relevant departments do not issue the required documents so quickly. Consequently, the entire agreement can be invalidated, often because the borrower or their lawyer does not receive the notification in time. This bureaucratic entanglement effectively torpedoes potentially viable debt restructuring agreements.

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There are cases where the Public Sector represents only 5% of the total debt, yet manages to 'torpedo' a general agreement in a highly abusive manner.