The first 25 cases of debt settlement through the new out-of-court mechanism were completed with a debt reduction of up to 75%.
According to the Ministry of Finance, these first cases were presented today in a teleconference held by the Minister of Finance, Christos Staikouras with the competent bodies of the financial sector, the Bank of Greece and the Independent Public Revenue Authority.
According to the ministry, the specific arrangements are viable, realistic and fair for the debtor, as they result from a special automated algorithm, which takes into account the financial data (income, reasonable living expenses, property value, etc.). debtor, his co-debtors and guarantors. In this way, the manual procedures of the past are eliminated, bureaucracy is reduced and – above all – transparency and efficiency are enhanced, as all the criteria and conditions provided by law are controlled and cross-checked in an automated way.
The settings generated by the online platform may include:
a) Partial write-off (“haircut”) of debts, which may amount to:
- up to 75% on the basic debt, and up to 95% on the increments of overdue debts to the State (AADE and e-EFKA)
- up to 80% on principal debt, and up to 100% on interest on non-performing loans to banks and loan and credit management companies
or also
b) Long-term debt repayment:
- up to 240 installments for the State (AADE and e-EFKA)
- up to 420 installments for banks and loan and credit management companies.
With regard to the provision of debt write-off (ie debt “cutting”), the additional conditions of the legislation are checked, such as, for example, if the commercial value of the property is less than the amount of the debt, if there is no residual income after the coverage reasonable living expenses, etc. Therefore, the minimum monthly installment of the loan arrangement resulting from the algorithm is calculated based on the income and the value of the debtor’s property, co-borrowers and guarantors.
Three illustrative examples of regulation
1. A family of three from Attica with total debts over 170,000 euros to 5 financial institutions (35% mortgage and 65% consumer loans) and overdue debts over 13,000 euros to e-EFKA, submitted a request for regulation and was generated by the automated algorithm debt settlement proposal as follows:
a) for debts to financial institutions: write-off of more than 27,000 euros (ie, “haircut” of debts by 16%) and repayment of the balance in 35 years (420 installments), with a monthly installment of 46 euros and
b) for debts to e-EFKA: repayment in 20 years (240 installments), with a monthly installment of 90 euros.
2. A single-person household from Attica with total debts over 43,000 euros to 3 financial institutions (consumer loans) and overdue debts over 3,000 euros to e-EFKA, submitted an application for regulation and was produced by the automated algorithm proposing regulation as follows:
a) for debts to financial institutions: write-off of more than 34,000 euros (ie, “cut” of debts by 80%) and repayment of the balance in 10 years (120 installments), with a monthly installment of 75 euros and
b) for debts to e-EFKA: write-off over 125 euros (ie, “haircut” of debts by 4%) and repayment of the balance in 7 years (84 installments), with a monthly installment of 50 euros.
In total, the citizen will pay 125 euros per month, while he can repay 130 euros per month, according to the declared data.
3. A single-person household from Thessaloniki with total debts over 5,800 euros to a financial institution (consumer loans) and overdue debts over 8,900 euros to AADE, submitted a settlement request and was generated by the automated algorithm as a settlement proposal:
a) for debts to financial institutions: write-off of more than 4,600 euros (ie, “cut” of debts by 80%) and repayment of the balance in 2 years (24 installments), with a monthly installment of 50 euros and
b) for debts to AADE: write-off of more than 1,800 euros (ie, “haircut” of debts by 5%) and repayment of the balance in 18 years (216 installments), with a monthly installment of 50 euros.
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