The new improvements to the Out-of-Court Mechanism procedure.
Introduction
The impressive increase in the number of debtors participating in the platform of the Extrajudicial Mechanism in order to regulate their debts to Banks- Funds, Tax Administration & EFKA, shows that this procedure has started to gain ground and convince for its effectiveness.
The recent legislative changes to the platform of the Extra-Judicial Mechanism aim to improve the terms of settlement (e.g. increase of the haircut, reduction of the interest rate) but also to correct omissions (e.g. settlement of debts to the tax authorities and EFKA arising from inheritance or due to a company that has ceased operations).
Through the Out-of-Court Settlement, debtors have the possibility to settle all their debts to Banks, Funds-Servicers, Tax Administration & Efka, avoiding the courtrooms and the time costs involved in unilateral regulation with each creditor separately.
The following changes have been incorporated into the platform of the Extra-Judicial Mechanism:
- Additional “haircut” of up to 28% on secured loans: the changes have already been incorporated into the platform’s algorithm, which generates the proposed arrangements that are assessed and submitted for voting by the financial institutions.
- In the case of a vulnerable debtor’s application(the relevant Vulnerability Certificate must have been issued), the debt restructuring proposal resulting from the platform’s algorithm must be accepted by the Banks, the servicers (Funds) and the State. If creditors disagree with the designation of the debtor as vulnerable, they will have to take legal action (bearing the costs of the procedure). The debtor has the possibility to reject the platform’s proposal.
- The interest rate for all debt arrangements is set at 3% fixed for 3 years. Specifically, for the arrangement of debts to the Tax Office and the National Social Security Fund, the interest rate is set at 3% for the duration of the arrangement. With regard to the arrangements with banks and fund-servicers, for debts secured by real estate or other privileges the interest rate is 3% for the first 3 years, while for unsecured debts the interest rate is 4% for the first 3 years. Note that before the changes, the specific euribor rate plus 2.5 points for secured debts and plus 3 points for unsecured debts, i.e. approximately 6.4% & 6.9% respectively.
- The possibility of joining the procedure of the Extrajudicial Mechanism for natural persons who “inherited” debts to the tax authorities and the EFKA, from companies that have been dissolved or liquidated or have ceased their operation. A similar possibility has been given to natural persons who have accepted as heirs, debts of deceased persons to the tax authorities and the EFKA.
- In addition, the provision for an advance payment of up to 10% of the debt has been added, if the debtor has been notified of an auction programme. This provision does not apply to vulnerable debtors.
What are the benefits of joining the Extra-Judicial Mechanism?
- The Extrajudicial Mechanism offers the possibility of settlement to natural and legal persons with debts of more than 10,000 euros to the Tax Administration, the EFKA, banks and Funds – Servicers, as well as for debts and debts in favour of third parties (e.g. debts to Municipalities) that are established and collected by the tax administration.
- Individual and collective enforcement measures against the debtor are suspended from the final submission of the application until its completion and for as long as the arrangement resulting from the platform is respected.
- Ability to issue proof of tax and insurance compliance.
- Ability to lift seizures imposed on bank accounts and real estate owned by the debtor.
- Settlement of loans guaranteed by the Greek State.
- Ability to write off principal, interest, fines and surcharges.
- Possibility of debt adjustment up to 240 instalments for debts to the tax authorities and EFKA and up to 420 instalments to Banks & Funds-Servicers.
- The application on the platform of the Extra-Judicial Mechanism is submitted electronically through the the platform using the Taxisnet passwords.
Contact for your case