Introducing and Implementing a Law on Debt Adjustment in Greece at a time of economic crisis Melina Mouzouraki, Dublin 2012
Who may apply? All individuals – except traders Individuals who are permanent insolvent Individuals who are not in the situation of insolvency on purpose (fraudulently)
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
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
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)
PROCEDURE Extra- judicial debt payment plan If failed, filing in court of the petition Second attempt to reach an agreementwithin 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.
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.
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
Example of a debtor with a dwelling 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”
Evaluation of the law 1. An important tool to tackle overindebtedness 2. Raised bilateral debt adjustment plans. Better 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
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.
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
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
Evaluation of the law An important tool to tackle overindebtedness 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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