Settlement of Debts up to 240 instalments to the State and Insurance Funds

By SOLVDEBT Articles April 8, 2022

Everything you need to know about the 240 instalment scheme

The problem

After two years of pandemic, the overdue debts to the state and insurance funds have proven to be a real thorn in the side of thousands of households, freelancers and businesses, who face the consequences every day.

The consequences of an individual or a company owing vary from case to case and from debtor to debtor. However, we can list below the most common ones.

Seizure of a bank account

In the case of overdue debts, the State and the Insurance Funds impose seizures on the bank accounts of debtors, freezing their balance for the payment of overdue debts. The only exception is the attachment of up to €1,250 per month (e.g. wages, pensions and all kinds of social security benefits).

Inability to Sell Property

If a debtor wishes to sell his property, he will not be able to obtain tax and insurance information.

The only way to proceed with the sale of the property is to agree to deduct the entire amount of the debt from the sale price, so that the amount of the debt will either be greatly reduced or not collected at all.

Inability to transfer property

A classic case is when parents wish to transfer their real estate to their children during their lifetime. Similarly to the case of sale, the owner is required to have tax and insurance information.

Transactions with the State

It is well known that the Greek State, for decades, is considered the largest client for a number of freelancers and private sector companies.

An indicative example is the technical companies that undertake to carry out public works (e.g. roads, technical works, etc.) as well as the companies that supply hospital equipment and consumables to Greek public hospitals.

All these freelancers and businesses are required to have tax and insurance information in order to work with the state and, most importantly, to get paid!

Inability to Retire

Another issue that concerns thousands of freelancers is the issue of pensions.

For those who want to retire at some point and owe large sums (e.g. more than €20k), they should make provisions and enter a settlement process earlier so that their debt is manageable when it is time to apply.

This is because the law recognises the right, when someone applies for retirement and owes his/her insurance fund up to a certain amount (i.e. €20k in the former OAEE, €15k in the former ETEAA and €6k in the former OGA), to be able to pay it back up to 60 months. Any excess amount, however, will have to be paid back in one lump sum.

Is there a realistic solution to all this?

It is a given that years of accumulated debts are not a realistic scenario to be repaid in 12 or 24 instalments, although these are the arrangements offered directly by the State and the insurance funds.

However, there is the possibility through the Extrajudicial Mechanism to settle debts to the State and insurance funds, up to 240 instalments with the possibility of cancellation.

What is the Extra-Judicial Mechanism and which debts is it for?

It is a procedure provided for by Law 4738/2020, the Second Chance, where through an online platform individuals, freelancers and businesses can settle all their debts to banks up to 420 instalments and to the State and insurance funds up to 240 instalments.

What are the conditions?

A basic condition for the Out-of-Court Mechanism to start is that the debtor must consent to the lifting of tax and bank secrecy.

Particular attention should be paid to the case of an individual, where if he or she is married, the spouse must agree to the lifting of his or her own tax and banking secrecy in order for the procedure to proceed. The only exception is if the debtor is either separated (there must be an indication of this in the debtor’s record with the AADE) or divorced.

What are the exceptions?

When debts to the State, Insurance funds and Banks (or Loan Administrators) do not exceed the amount of 10.000 €.
When the debts to a single Bank (or Loan Manager) do not exceed 90% of the total debts to Banks, State and Insurance funds.
When the company (legal person) has been wound up or liquidated.
When the debtor has proceeded to (a) the validation of a reorganization agreement, or (b) bankruptcy, or (c) inclusion in the Katseli Law (Law 3869/2010) or (d) the old Extra-Judicial Mechanism for Enterprises (Law 4469/2017), unless the debtor waives these procedures in time.

What is taken into account in setting the arrangement?

The application of the Extra-Judicial Mechanism, in addition to income, takes into account the assets (movable and immovable property) and in the case of a natural person, his/her marital status, the income – property status of spouse and dependants.

How is the tranche to be approved?

The instalment and, where applicable, the write-off, which will be derived from the Act’s calculation tool, is based on the application data submitted on the Act’s online platform. In particular, the calculation tool calculates the instalment and the number of instalments (up to 420 instalments for debts to banks and up to 240 instalments for debts to the State and insurance funds).

Are creditors obliged to participate in the process?

Banks or Debt Management Companies are not obliged to participate in the procedure and propose a settlement to the debtor.

should be agreed by the majority, i.e. those representing 60% of the total claims on financial institutions and 40% of them secured by mortgage, or mortgage lien, or pledge, or other special privilege of special privilege.

Indeed, the Funding Agencies are not obliged to adopt the result of the Act’s Calculation Tool, but to make their own proposals.

On the contrary, the State and the insurance funds are obliged to offer the debtor an arrangement if the debtor is deemed viable.

Why us?

Why should you choose us for the preparation and submission of your application to the Out-of-Court Mechanism system?

Because we are certified advisors in the Out-of-Court Mechanism platform process. That is, you can officially register us as your consultants in the Out-of-Court Mechanism process.
We have many years of experience and knowledge in debt restructuring, whether it concerns debt arrangements to the State and social security funds or to banks.
We have submitted dozens of applications on the platform of the Extra-Judicial Mechanism with high success rates.

Find a solution to your problem and contact us now, for your case.