The status of “vulnerable debtor” has the potential to prevent the auction of a debtor’s main residence and force his creditors to proceed to a comprehensive settlement of his debts.

The purpose of this article is to clarify the criteria for obtaining the status of vulnerable debtor and in which cases this status can be valuable.

Who is considered a “vulnerable debtor”?

To qualify as a vulnerable debtor, a debtor must meet certain criteria.
Income criterion
The total annual income for a single person household cannot exceed €7,000, plus €3,500 for each additional household member, up to a maximum of €21,000 per year.
Property criteria
Real estate: The total taxable value of the household’s real estate as determined by the ENFIA may not exceed a total of EUR 120,000 for a single person household, plus EUR 15,000 for each additional household member, up to a maximum of EUR 180,000.
Asset presumption: The deposit limits for each type of household are set as follows:
– Single person household: €7,000
– Household consisting of two members: €10,500
– Household consisting of three members: €14,000
– Household consisting of four members: €17,500
– Household with 5 or more members: €21,000

Vulnerable debtor & Extrajudicial mechanism

Law 5072/2023 introduced significant changes and improvements to the out-of-court mechanism, some of which also concern the “vulnerable debtor”.

In particular:

1. For the debtor who meets the criteria of vulnerable and has issued the Certificate of Vulnerable Debtor – Gov.gr which has a duration of 3 months, the creditors (banks & servicers-funds) are obliged to accept the resulting proposal for adjustment known as “counter-proposal of creditors” (article 71 paragraph 2A of Law 4738/2020).
2. The vulnerable debtor is exempted from the obligation to pay an advance payment (even if a foreclosure has been imposed and an auction has been scheduled on his/her property), for an arrangement resulting from the calculation tool of the law.
3. The vulnerable debtor will not only receive a settlement proposal for debts for which he is the principal debtor but also for debts for which he is a guarantor, regardless of whether the principal debtor is a private individual or a company.
4. A vulnerable debtor can receive aid of between EUR 70 and 210 per month for the repayment of a loan secured by his/her main residence, provided that the conditions of article 28 of Law No. 4738/2020.

Vulnerable debtor & Bankruptcy

When a private individual files for bankruptcy due to the inability to service his debts to Banks, Servicers, the State and insurance funds, this entails the liquidation of his property including his main residence, which, upon declaration of bankruptcy, will form part of the bankruptcy estate.
In the case of the vulnerable debtor, the main residence does not have to be sold, as the bankrupt can request the transfer of his/her main residence to the Acquisition and Re-leasing Agency (which has not been established to date), and retain possession of it by paying rent for a period of up to 12 years, with the possibility of repurchasing the property at the end of the 12 years or earlier.
In order to activate the transfer of the main residence to the institution, the debtor must submit an application within 60 days from the date of publication of the decision on the declaration of bankruptcy, according to the procedure provided for (article 219 of Law 4738/2020). In fact, the debtor may also receive a housing allowance during the lease of his/her home, which is paid directly to the Acquisition and Re-leasing Agency.

What happens to my property until the Acquisition and Re-leasing Agency is set up?

The legitimate question that arises is what happens to the vulnerable debtor’s property until the entity that will lease it for up to 12 years is set up and allows him to buy it back at the end of the period.
Until the establishment of this body, the intermediate state support programme, which is valid until March 2025 (article 104 of Law No. 5072/2023), according to which the sale of the bankrupt’s main residence may be suspended until its transfer to the Entity (when it is established) by the payment of a monthly instalment calculated at the rate of 3.5% of the value of the main residence, based on the value from the last ENFIA determination act, divided by twelve.
For example, if the value of the main house in the last ENFIA declaration is €100,000 then the monthly instalment the poor person will be asked to pay will be €291.66 (100,000*3.5%/12). Part of this amount will be paid by the State, i.e. from €70 to €210, depending on the composition of the poor person’s household.

Vulnerable debtor & Enforced enforcement against his/her main residence

Similarly to the bankruptcy case, the “vulnerable debtor” enjoys more privileges than the ordinary debtor in the case of an auction of his/her main residence.
In particular, they can request the transfer of their home to the acquisition and leaseback agency to lease it for up to 12 years, with the possibility of repurchase, based on the procedure mentioned above.
Until the establishment of this entity, the debtor can join the interim state support programme to suspend the auction of his/her main residence. However, the calculation of the monthly rent will differ from that of the bankruptcy case, as the value of the property indicated in the ENFIA declaration will not be taken into account, but the price of the first offer indicated in the foreclosure report, i.e. the market value of the property as calculated by the valuation report of a certified appraiser.

Apart from the above cases, the status of “vulnerable debtor” alone, when combined with a request for debt adjustment, may be a reason to suspend a scheduled auction of the main residence, or to cancel its continuation, for reasons of abuse on the part of the creditor.

Instead of epilogue

Vulnerable debtor status can be valuable for any individual who meets certain asset criteria to have a strong line of defence against enforcement measures that may be applied by creditors.
In addition, the vulnerable status can be a powerful bargaining chip for the debtor, as it can reduce the aggressiveness of the Funds and make them more accommodating in finding a viable solution for the debts.