The reforming of the Bankruptcy Law in Greece
Greece, April, 2020
The debtor shall be fully relieved of his debts to banks, the State or other creditors, 24 months from the filing of the Bankruptcy petition, and 12 months from the declaration of Bankruptcy, according to the draft of the new Bankruptcy Law that the Greek Government and the Ministry of Finance are working on. It shall be about a second opportunity especially to households to continue their lives free from old debts, but after accepting to lose all their property, which will be liquidated by a court decision
The new Bankruptcy Law is expected to set uniform rules and procedures for the Bankruptcy of legal entities and individuals and the aim is for the final text of this Law to be ready within the next two months in order to be voted by the Parliament. The new framework will replace the law 3869/2010 – as in force (applicable to individuals), the current “first home” protection regime, but also the provisions for the Bankruptcy of businesses, which are now consolidated under this new Law.
According to the draft of the new Bankruptcy Law, all legal entities and individuals have the right to be declared bankrupt, provided that they are unable to pay their overdue financial obligations. The debtor shall be treated as suspended when he does not pay his overdue debts to the State, social security organizations or banks at least 40% of his total overdue obligations and for a period of at least 6 months, but also when the re-payment inability is threatened, that is, even if it has not yet occurred.
Bankruptcy is declared at the request either of the debtor, or one – or more – creditors holding a legitimate interest, or at the request of the Prosecutor of the Court of First Instance, on grounds of public interest. When the petition is filled by a creditor or creditors of the debtor, they must represent at least 20% of all claims of the debtor. The debtor is obliged to submit, without fault of delay, a petition to the Bankruptcy court for the declaration of Bankruptcy within 30 days at the latest, from the day he was found to have a general – or threatened – inability to pay his debts.
The Bankruptcy court rejects the application if it is proved that it was filled abusively or if the debtor submitted it for fraudulent avoidance of payment of its debts. If not, the court appoints a supervising judge and a Bankruptcy trustee and it orders the sealing of the Bankruptcy estate. With the same decision, the court concludes on the sale of the debtor’s assets or on the sale of all the assets of the company.
The Bankruptcy estate includes all of the debtor’s property at the time of the declaration of the Bankruptcy, wherever it is located. The draft new Law sets a time limit of five years, after which the debtor’s property that has not been sold shall be returned to him.
With the declaration of Bankruptcy, all the individual prosecution measures of the creditors against the debtor, which have been exercised for the satisfaction of their Bankruptcy claims, are automatically suspended. The declaration of Bankruptcy causes the automatic termination of all contracts of the debtor on the 60th day following the declaration of the Bankruptcy.
It is worth noting that the guarantor shall continue to be liable to the creditor after the Bankruptcy.
Finally, the draft of the new Bankruptcy Law provides for the out-of-court settlement of debts by submitting an application on an electronic platform to the Special Secretariat for Private Debt, through which the debtor will explore the possibility directly with its lenders to find a solution, on the basis of liquidity or on the basis of the voluntary delivery of the debtor’s property.