Out-of-court settlements with a large debt cut

Of Leonida Stergiou

With about 1,500 new applications and at an increasing rate, the out-of-court mechanism of the new bankruptcy is progressing. According to his information Capital.grthe total number of applications that are in the final stage of submission has approached 5,000, with the competent authorities promoting improvements in order to speed up the procedures and increase the number of cases of sustainable regulation.

The applications

The total number of applications, including those that are just at the initial stage where the interested party opens an account on the online platform, has exceeded 52,000.

At the initial stage there are almost 15,000 applications, at the stage of lifting the tax and banking secrecy over 30,000, while at the final stage of the final submission they exceed 5,000 which correspond to a debt of almost 2 billion euros. Of this, one third concerns debt to the tax authorities and the Fund, while the rest to banks.

The debts

The total debt (out of a total of 52,000 applications), which mainly comes from households, amounts to about 18 billion euros, of which 80% relates to loans to banks. Bank executives and loan management executives report that all settlement cases involve debt relief, which averages around 50%.

The percentage for debts to the State is lower, where it ranges between 25% and 35%. The rates on the haircut depend on the type of loan, the type of debt, the income, as well as how many creditors are involved.

For example, in cases where many creditors are involved (banks, tax and insurance funds), the haircut is about three times higher than in the case between a debtor and a creditor (eg a bank).

“Haircuts”

As market executives explain, almost half of the debts that can be regulated by the new bankruptcy algorithm are accompanied by a 10% haircut. Haircuts of the order of 30-50% receive about 1 in 5 settings, while up to 60% receive 90% of cases.

Mobility in the Ministry of Education

According to information, there is intense mobility in the Ministry of Finance, despite the increase in applications and cases under regulation through an out-of-court mechanism. The aim is to increase the sustainable arrangements and cases of the pre-bankruptcy and bankruptcy stage.

The course of the new bankruptcy is still not considered satisfactory, despite the increasing trends that are observed. There was a period that was necessary in order for the debtors and those involved (accountants, lawyers, chambers, companies, etc.) to become familiar with the system and the new legislation. Then the help desk developed with the support of management companies brought acceleration.

Sources of delays

Talking to market executives, they cite a few examples of simple reasons that can delay the whole process:

1. Involvement of several co-owners and co-guarantors, where one party does not agree with the removal of confidentiality.

2. Indication of different elements (eg square meters, co-ownership rates) in the contracts between owners, banks, etc.

3. Lack of any supporting document that does not exist digitally and other services or authorities are late in issuing it. A typical case is the TAP certificate, where the issuance by some municipalities required up to six months.

Improvements are coming

Because the system examines each case based on specific criteria and the algorithm suggests solutions, an error in a document or different entries for the same item would cause delays in opening and re-submitting requests, etc.

All these cases have been recorded, the algorithms have been improved and at the same time technical and legal solutions are being sought to make the system more flexible and faster.