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Implementing Debt Adjustment Law in Greece Amid Economic Crisis

Learn about the debt adjustment law in Greece, who qualifies, types of debts covered, discharge period, exemption from liquidation, procedure, case examples, costs, evaluation of the law, and future steps like debt counseling and monitoring.

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Implementing Debt Adjustment Law in Greece Amid Economic Crisis

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  1. Introducing and Implementing a Law on Debt Adjustment in Greece at a time of economic crisis Melina Mouzouraki, Dublin 2012

  2. Who may apply? • All individuals – except traders • Individuals who are permanent insolvent • Individuals who are not in the situation of insolvency on purpose (fraudulently)‏

  3. Which debts? • All kind of debts to credit institutions (due or not due, secured or not secured, professional, mortgage or any other debt)‏ • All debts to any third person EXCEPT • Debts from claims related to wrongful acts • Administrative fines, penal fines • All kind of taxes to the State • Debts related to public insurance

  4. Discharge Period • 48 months after issuance of the judgment • Paying according to income- Rejection I bn case of 4 months delay in payments • No standard budget- Debtor allowed to keep income to cover family basic needs for a living. • Zero payments in cases of unemployment, severe health problems, non-existent income- Periodical review of the situation

  5. EXEMPTION FROM LIQUIDATION OF PRIMARY RESIDENCE • Extra Payment Plan of a duration of up to 20 years. • Pay an amount of debt equal to 85% of the value of the house and exempt the house from liquidation. • Valid from dwellings of a value up to 300.000 euros (varying according to the personal situation of the debtor)‏

  6. PROCEDURE • Extra- judicial debt payment plan • If failed, filing in court of the petition • Second attempt to reach an agreement-within 2 months after filing-Creditors with a debt of 51% of the total debt, and all creditors with secured debt, have to agree. • If failed, hearing. • If petition accepted, payments for 4 years according to judgment. • Debt relief pronounced by the court after execution of 4 years payment plan.

  7. EXAMPLES FROM SPECIFIC CASES • Profession : Retired • Personal status : 65, married, two grown-up children, one, 33, unemployed, living with the parents • Income : 1.273 euros (pension) Spouse no income. • Assets : two cars from 1999 and 2002 • Total debt : 122.345 euros (to 8 banks)‏ • Judgment : To pay 500 euros per month. Keep an income of 773 euros (48 months). Total of 24.000 euros. Relief from the rest.

  8. Costs • No fee to pay when filing • No judicial cost to pay, even in case of rejection of the petction • Representation in court by a lawyer not compulsory • But- in practice considerable fees for legal counselling and case specific costs

  9. Retired, Single, 62 Income : 968 euros Total debt : 135.000 euros (to 6 banks)‏ Dwelling : An apartment of 52 s.m.(1981). Estimated value by the court :73.000 euros. To pay 400 euros per month to all creditors, evenly distributed, for 48 months. To pay for another 15 years (180 instalments), the sum of 62.050 euros (85% of the value of the house) Period of “grace” Example of a debtor with a dwelling

  10. Evaluation of the law • 1. An important tool to tackle over-indebtedness • 2. Raised bilateral debt adjustment plansBetter plans, more suitable to the real payment capacity of the debtors • 3. Beneficial to credit institutions, too, as it prevents from an horizontal haircut and focuses on case-specific circumstances. • Protection of the dwelling

  11. What should the debtor include in the petition? • All debtor's assets • All kind of income of the debtor • All kind of income of his/her spouse • All creditors and all their claims broken down by principal, interest and costs. • A debt settlement plan.

  12. Statistical Data • 12.000 extra-judicial payment plan proposals • 7.800 petitions filed within 2011 • More than 1000 judgments issued • 60% of petitions accepted • 40% of petitions rejected, but mostly on procedural reasons • 60% of petitions filed by debtors who asked the exemption of their dwelling from liquidation

  13. The way forward • Need for professional independent debt counselling • Need for licensing and supervision of these professionals • Need to provide free debt and legal advice and representation in court • Need to ameliorate infrastructure in courts • Need to sensitize and train law practitioners and judges • Need to monitor enforcement of the law, defend it and amend, when necessary

  14. Evaluation of the law • An important tool to tackle over-indebtedness • Positive effect also to other debtors : better suited adjustment plans proposed by the banks • Beneficial to the credit institutions : law orientated to a case-specific debt relief and not to an horizontal haircut. • Protection of the debtor' s dwelling.

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