1. Does Greek law include a special regime for individual’s bankruptcy?
Greek law, until recently, had no regime concerning individual’s (non-merchants) bankruptcy. Law 3869/2010, enacted on September 2010, was the first piece of Greek legislation dealing with the issue of over-credited individuals, providing them with the option to achieve an official judicial settlement, concerning the debts they were not able to repay. The procedure was amended recently by law 4161/2013.
2. What is the scope of law 3869/2010?
Law 3869/2010 is applicable in debts (a) of individuals who do not have the legal capacity to get bankrupt (according to merchants bankruptcy law) and (b) have, by no fraudulent intention, permanent inability to pay back their debts.
According to article 1 of law 3869/2010, debts that have been undertaken during the last year before the submission of the discharging application, as well as debts stemming from illegal acts committed by fraudulent intention, administrative fines/sanctions, fines, tax/debts due towards the State and Organisations of Local Authorities, Public law corporate bodies charges and contributions towards social security funds, are excluded from the scope of the provision.
3. Is it possible for a debtor to be discharged by debts more than once?
No. The debtor can be discharged by his debts once only.
4. What is the procedure that has to be followed in order to achieve a settlement or relieve of debts?
According to law 3869/2010, the procedure has three steps:
1. Out of Court Settlement
2. In-Court Compromise
3. Judicial settlement –debts discharge
According to law 4161/2013, the Out of Court Settlement is not any more a prerequisite in order to proceed with the petition. Out of Court Settlement was replaced by a discretionary mediation procedure.
According to article 2 par. 4 the Credit Institutions (creditors) must provide the debtor with a detailed statement of the debt, the interest rate and the amount that corresponds to 10% of the last performing instalment, within 10 working days after the submission of an application, free of charges. A fine between 500 and 10.000 € can be imposed on the Credit Institutions which do not comply with the above obligation.
5. What is the procedure to be followed in: “In-Court Compromise”?
The debtor seeking relieve from his debts has to submit a petition to the competent Court, which according to article 3 of law 3869/2010 is the Magistrate’s Court of the debtor residence.
The petition must be accompanied by:
i) a document containing the property and the income status of the debtor and his/her spouse.
ii) a list of creditors and their claims, divided into capital, interest and expenses.
iii) a settlement plan, taking into account the special circumstances of the debtor’s assets, property and family situation combined with the creditors’ interests.
Additionally the debtor can also submit:
a) a statutory declaration that the property and creditors lists provided by him are true
b) every relevant document about his property, his/her income status, his creditors and their claims.
If a creditor is not included in the provided list of creditors, his claim is not affected by the whole process.
At the day of the submission of the petition two hearings are set. The first hearing concerning the petition, according to the provisions, is set obligatorily within 6 months from its submission. However, due to the workload of the Courts, in practice the hearing is never set within 6 months. The second hearing is set within 2 months form the submission. At this hearing the Judge will verify the outcome of the settlement (if such a settlement took place) or he will decide on the request for temporary injunctions according to art. 781 of the Greek Civil Procedure Code (if requested by the debtor). Until the above-mentioned hearing the execution measures are suspended. Additionally the debtor has to pay the amount that corresponds to 10% of the instalment he had to pay to all the creditors at the day of the submission of the petition (not less than 40 € per month).
6. How are the creditors aware that the debtor submitted a petition? How can they express their views on the proposed settlement?
The debtor must deliver the petition (by a bailiff) to the creditors within 15 days from the submission. The creditors have access to all the documents submitted to the Court by the debtor. Creditors must express -in written- their views on the settlement plan and/or propose modifications within an exclusive term of 1 month following the delivery of the petition.
If the conditions of a settlement as defined in art. 7 (Question 9 – case II) are met the Judge verifies the settlement at the set date. If a settlement is not achieved the Judge at the day of the hearing can impose a suspension of the execution measures, and asset disposal prohibition. Additionally the Judge can impose to the debtor the obligation to pay monthly instalments until the issuance of the final decision on the petition. The amount cannot be less than the amount corresponding to 10% of the instalments the debtor had to pay to all the creditors at the day of the submission of the petition (not less than 40 € per month). In case the debtor delays intentionally the payment of the set instalments for more than 3 months art 11 par. 2 is applicable (defeasance from the settlement).
7. Does the submission of the petition result in suspension of execution measures?
The debtor or anybody else having legal interest, can apply for provisional remedies suspending any measures of procedural enforcement against the debtor, or any other provisional remedy in order to avoid any reduction of the value of the debtor’s assets. The suspension is granted until the judgment on the submitted petition is issued; provided that the petition is likely to be successful and that it is probable that the debtor will suffer substantial damage if the suspension is not granted. If a suspension is granted a simultaneous asset disposal prohibition is imposed to the debtor.
The provisions concerning the provisional remedies are applicable in case the debtor appeals against the decision of the First Instance Court that rejected the petition.
8. Do the debts bear interest after the delivery of the petition?
Not secured, with collaterals, claims do not bear interest after the delivery of the petition to the creditor, while secured with collaterals claims still bear contractual interest of non-delinquent debts, until the issuance of the judgment on the petition.
9. How can an in-Court compromise be achieved?
Case I: If all the creditors agree with the proposed plan is validated by the competent Court.
Case II: If creditors representing more than ½ of the total amount of debts, including all secured creditors and at least ½ of labour claims, agree with the settlement plan, the Court may substitute the consent of the rest of creditors who disagree and accept that a compromise and settlement has occurred.
The above substitution of the creditors’ consent is not allowed and the compromise is not validated when;
i) the claim of the creditor who objects is not satisfied to the same extent as that of others, or
ii) if the objecting creditor proves that had the procedure went on it would recover a higher amount of the debt or
iii) if the claim of the objecting creditor is contested by the debtor or by any other creditor.
10. Is it possible for the creditors to charge the debtor with judicial expenses for the procedure of the achievement of the in Court compromise?
No. The creditors cannot claim any amount for judicial expenses for this procedure.
11. What is the procedure to be followed in “Judicial Settlement”?
If the settlement plan is not accepted by the creditors, or the requirements for the substitution of consent of the creditors who do not agree are not met, the procedures for the judicial debt discharge are activated. In that case the Court after examining whether the criteria of the law are met, it proceeds with issuing its ruling on the petition. If a creditor was not included in the plan and he has not intervened in the procedure the Court can summon him according to art. 748 par. 3 Greek Civil Procedure Code.
12. What happens if the debtor’s income/property are insufficient to cover the debt?
If the Court rules that the debtor’s property and income are inadequate after taking into consideration the spousal contribution, in conjunction with the personal circumstances of the debtors and his family, it will identify a specified amount that the debtor has to pay, on a monthly basis for a period of 3 to 5 years directly to his creditors (except if the Court rules otherwise). In that case all the creditors are ranked pari pasu.
In exceptional cases (e.g. permanent unemployment or severe health problems of the debtor), the Court can define very low monthly or zero amount payments. In that case the Court can set a new hearing (not within the next 5 months) in order to modify the monthly payment plan.
The judgment is directly enforceable, and no suspension can be granted. In addition no judicial expenses can be claimed. The amount of settlement may be modified by new Court ruling, in the event of subsequent facts or changes in the debtor’s property or income status.
13. Does the debtor have any additional obligations during the settlement period?
During the period of the settlement the debtor is obliged to work or, at least, to make reasonable effort to find an appropriate position. Moreover he is obliged to inform the Court about any changes concerning his address, his employer and any substantial improvement of his income or his assets.
14. Does the debtor’s property have to be liquidated? Are there any exceptions?
If the Court rules that liquidation of the property of the debtor is required, it proceeds with the appointment of a liquidator. Secured creditors are satisfied according to their privilege from the product of the liquidation.
However, it is possible for the debtor to submit a liquidation proposal requesting the exemption of its main residence from the property under liquidation, provided that the main residence does not exceed the size set by the tax laws for the acquisition of first residence +50%.
In such a case the Court proceeds to the settlement of the debt, ruling that the debtor has to repay a total amount up to 80% of the objective value of the property.
Under such circumstances the debtor can enjoy a grace period, and the payable interest cannot exceed that of current (not denounced) loans, with no compound interest. The duration of the settlement cannot exceed a period of 20 years and secured creditors are satisfied according to their privilege from the debtor’s payments. The law introduces an exception to the duration of the settlement in case the repayment period was longer according to the loan contract. However, even in that case the duration of the settlement cannot exceed a period of 35 years.
The protective provisions for the debtor’s main residence apply equivalently, in case of the only property -that can be used as a residence- of a debtor who lives in another property (belonging to a third party), provided that his/her spouse has no such property.
If the debtor does not follow the repayment schedule set by the Court, the creditor whose claim is not repaid can proceed to the liquidation of the debtor’s main residence. However, the creditor cannot proceed before the debtor fails to pay at least four monthly installments.
15. Duty of provision of accurate statements
The debtor has the duty to provide the creditors and the Court with accurate information on his property and income status. If the debtor breaches that duty, over and above any other consequences, it will lead to rejection of the petition by the Court or the defeasance from the achieved settlement.
The above consequences apply equivalently if the debtor omits to include any creditor in the list of the creditors according to art. 4 par. 1.
Creditors are allowed to have access to the data pertaining to the economic status and the current income of the debtor.
16. Can the debtor be discharged of the remaining debts after complying with the 4 years repayment schedule?
Yes. Subject to the provisions concerning the liquidation of debtor’s property, the debtor is discharged of the remaining debt, if he complies with the Court’s ruling.
In case the debtor delays any payment for more than three months or is frequently in delay, the Court, on request of any creditor, may declare his defeasance from the settlement.
In case of non compliance of the debtor with the terms of the Court decision, the creditors’ claims are established again to the amount they were before the discharge (as if the discharge petition has never been submitted to the court).
17. Are the guarantors discharged?
Notwithstanding the fact that the discharge process run by the debtor does not relieve the guarantors of the debt, the guarantors can take advance of the provisions of law 3869/2010, independently. However, the guarantors can not avail themselves by the debt discharge process of law 3869/2010 if the Court is satisfied that the guarantor’s intention, when giving his guarantee, was to make profit out of this activity. According to art. 5 (as it was amended by law 4116/2013) the petition must be delivered to the guarantor within 15 days from the submission.
18. How long are the Credit Institutions allowed to keep data?
The maximum period that Credit Institution or third persons are allowed to keep data concerning the procedures of law 3869/2010 is 3 years, after the discharge of the debtor according to article 11.
19. Are there any legal remedies available against Judgments of the competent Court?
The Judgments of the competent Court are subject to appeal and cassation, according to article 560 of the Greek Civil Procedure Code.