New debt settlement helps low incomes

New legislation on debt settlement will seek to protect households from accumulating massive debts and bring an end to the practice of electing not to pay for strategic reasons, Prime Minister Kyriakos Mitsotakis told a cabinet meeting yesterday.

The first step toward protecting the vulnerable is total transparency about every property of those concerned and an end to secrecy.

“We need to do the necessary cross-checking and not salvage strategic non-payers, as has happened so many times in the past,” Mitsotakis said.

Before a debtor goes into bankruptcy, they will be given the opportunity to reschedule their debts out of court. The state will take part in this process.

The new law also provides for a mechanism of timely notification, to avoid the excessive accumulation of debt. For those who opt for a rescheduling of debt, any foreclosure and auctioning of property will be suspended.

The rescheduling process should not exceed two months; after it is completed, the most vulnerable households will receive a state subsidy. For a mortgage, for example, a debtor will receive 70 euros per month, plus €35 for each household member.

The subsidy will be capped at €210 per month, irrespective of the size of the household.

A vulnerable debtor is defined as an individual with an annual income of no more than €7,000 plus €3,500 for any other household member. Annual income is capped at €21,000.

The total taxable value of the property should not exceed €120,000 per person plus €15,000 for an additional household member. The value is capped at €180,000.

Total deposits plus stock and bond holdings must not exceed €7,000 plus €3,500 per additional household member.

The new law gives the option to low-income households to continue living in their main residence, after forfeiting ownership, by paying a rent for a period of up to 12 years, with an option to buy it back.