Shining a light on the insolvency plan
Sigma wants to shine a light on the provisions of the newly-voted insolvency framework and how it will be enacted.
The framework called for the protection of homeowners, whenever possible, when it comes to their loans.
The main points in the insolvency framework to look out for are as follows:
Consensual repayment plan:
The debtor must present evidence that he/she cannot repay his loans.
He/she will not be responsible for more than 25% of his/her debts, other than additional debts accrued from the six months since his/her application.
The plan does not provide for payments that will deprive the debtor from logical living expenses, unless he/she wishes.
Creditors should not be put in a worse position than they would be in, in the case of a divestiture.
Whenever possible, the repayment plan established by the Insolvency advisor, will protect the primary residence of the debtor.
If the creditors to not accept the framework for the repayment plan, when the Insolvency Advisor deems the debtor meets the requirements under the law, then the debtor may request and court ordered enactment of the insolvency framework. In the case the main criteria are as follows:
Non-consensual repayment plan
The total amount of debts accrued, paid off or not, cannot surpass the amount of €350 thousand.
At one of the creditors needs to be secured by the primary residence of the debtor, of which the worth cannot surpass €300 thousand.
The worth of all the other property of the debtor cannot surpass €250 thousand.
The debtor must not be able to repay his/her debts because of a worsening of his/her finances due to the economic crisis, which resulted in the mitigation of his income, by at least 25%.
The main outcome from the repayment plan will be legally binding for the debtor and the creditor.
When the debtor can comply with his loans that are provided in the Repayment Plan, he is excused of unpaid debts, which are were not included in the plan.
The debtor with secured debt that invokes the Repayment Plan will not be absolved of secured debts that are covered by the Pan, unless there are provisions for such a thing.
The provision for the treatment of guarantors of insolvent borrowers, when that has to do with physical persons.
Treatment of Guarantors
The guarantor will be required to repay the total difference from the mortgage collateral of the primary borrower and the rest of the loan.
If for example the total of the mortgage is €100 thousand and the rest of the mortgage is €120 thousand than the guarantor is required to pay €20 thousand.
If the remainder of the loan is less than the original worth of the mortgage, then the guarantor is absolved of the debt.
The guarantor can take from the primary borrower the amount that he/she will be required to pay.
All the unfair terms will be erased from the total amount of the loan.
Banks will not be able to take legal action against guarantors unless:
1) His property, excluding his primary residence, does not exceed €750 thousand.
2) Since the beginning of the guarantor contract, he/she took the responsibility for €250 thousand (loans for the mortgage of the primary residence of the borrower) or under the enactment of the law he/she is responsible for, under the contract, the rest of the amount, worth up to €250 thousand.
The adjustment stands for non-performing loans since the legislation’s enactment.
The law will provide for the erasure of minimal debts which borrowers are proven to not have the funds to pay.
By court order, debts that do not reach up to €25 thousand will be absolved from the primary borrower and the guarantor.
The provisions of the final draft of the law are being reviewed by Troika, who are checking their compatibility with the plan before they give the go-ahead.