Debtors flock to extra-judicial mechanism

Thousands of borrowers resort to the out-of-court settlement system and its recommendations

Debtors flock to extra-judicial mechanism

Debt settlements through the out-of-court mechanism are proceeding rapidly, as the system supplies automatic solution to households and corporations for the arrangement of dues from bank loans and arrears to the state, according to data available to Kathimerini.

The figures reveal that there are 400 settlement proposals ready on the online platform of the extrajudicial mechanism. The proposals constitute solutions that stemmed automatically through the electronic system and have been forwarded to debtors for their formal consent and the signing of agreements.

Based on the same data, these cases also include debt forgiveness, with an emphasis mainly on arrears without collateral, which in their vast majority (70%) involve a haircut; a reduction of dues is also agreed for 35% of debtors with collateral – i.e. those who use property as a guarantee.

Another 500 cases out of those that have been examined to date concern a bilateral negotiation of the state with the debtor, as it was deemed unnecessary to involve the banks. Debts to the state – i.e. to the Independent Authority for Public Revenue for tax debts and to the Single Social Security Entity (EFKA) for social security contributions – are settled with repayment in up to 240 monthly tranches, while the arrangement of debts to banks and services can reach up to 420 monthly installments.

So far there 47,000 debtors have already turned to the extrajudicial mechanism, with some 16,000 of them reaching an advanced stage toward an agreement. In their vast majority (14,500 of them) they concern individual borrowers, while there are 1,500 cases of corporate loan settlements, mainly for small and very small enterprises.

Officials from banks and servicers explain that such cases require the debtors’ consent for the lifting of their bank or tax secrecy, so that the negotiations can begin, based on the automatic solution the algorithm of the mechanism comes up with. The solution proposed is standardized and transparent, say competent officials.