New bill on debt payment tabled, but 120 tranches are off limits for most

With a significant delay, the government on Monday submitted to Parliament the bill outlining a new scheme for the settlement of debts to the state, social security funds and local authorities in up to 120 installments.

Under the new legislation, individual debtors declaring a total annual income of up to 10,000 euros will have the opportunity to pay off their arrears in up to 120 monthly tranches, with a minimum value of 30 euros per tranche.

For debtors with incomes above 10,000 per year, the number of tranches will be determined by the tax administration based on each debtor’s personal income in 2017 and the amount of the debt that will be put up for settlement under the new arrangement.

However, for the vast majority of debtors, such as those who have arrears of up to 3,000 euros and incomes of up to 10,000 euros a year, the 120 installments are a pipe dream. According to data from the Independent Authority for Public Revenue there are 3,354,698 state debtors with arrears of up to 3,000 euros, representing 82 percent of the total. The number of tranches for them will start at 17, for debts of 500 euros, reaching 100, for arrears of 3,000 euros.

At the same time, repayment capacity, which is calculated via an algorithm and is probably the most important criterion of the new settlement, will not always be taken into account.

This is expected to lead to a major increase in the monthly amount that needs to be paid in several cases. For instance a debtor with an annual income of 21,000 euros owing 30,000 euros to the tax authorities will, according to the Finance Ministry’s coefficients, have the capacity to repay 580 euros per year, which means 48.33 euros per month.

However, that would extend the repayment to 620 tranches when the limit is 120. Therefore, in order to enter the payment plan, this debtor will need to shell out more than five times as much per month at 250 euros.

Debtors interested in entering the new arrangement can apply by June 28. The scheme concerns debts that expired by December 31, 2018, belonging to salaried workers, pensioners, the unemployed, self-employed professionals who have closed their books and all professionals exempted from the out-of-court settlement mechanism.

The plan also concerns companies, with the maximum number of installments for them set at 30.