Μake us preferred on Google

The out-of-court debt settlement mechanism remains one of Greece’s key tools for borrowers struggling with non-performing loans, but it is not necessarily the most suitable option in every case.

The landscape has become increasingly complex in recent years, as a large share of troubled loans has been transferred from banks to investment funds and loan-servicing companies. As a result, each borrower’s case requires a tailored approach, depending on the amount owed, income, assets and the stage reached in the debt-resolution process.

The out-of-court mechanism allows borrowers to consolidate debts to the state, the vsocial security system EFKA, banks and servicers. Repayment can extend to 240 installments for public and social security debts and 420 for bank and servicer debts, with partial write-offs also possible. However, it is not necessarily the best option for every borrower.

Bilateral negotiations with banks and servicers
In some cases, according to Greece’s public broadcaster ERTnews, borrowers may also negotiate directly with banks or servicers for lower payments, longer repayment periods, reduced interest or partial debt write-offs. Unlike the out-of-court mechanism, each debt is handled separately.

When a lump-sum payment is possible
Another option arises when a debtor has a substantial amount of money available and can repay the debt in full. In such cases, the borrower may seek a significant discount on the total amount owed in exchange for a lump-sum settlement.

What changes when a foreclosure auction is pending
The situation becomes more urgent once enforcement proceedings have begun and a foreclosure auction is approaching.

At that stage, in addition to the out-of-court mechanism or bilateral negotiations, borrowers may also need to consider legal action, depending on the circumstances of their case.

Checking whether a claim has expired
In some cases, borrowers may also examine whether a debt has become time-barred and, if the legal conditions are met, raise the issue in court. The best solution depends on each case’s circumstances.

Meanwhile, PASOK has proposed allowing borrowers to buy their debt before it is transferred to a fund. However, most non-performing loans have already been sold to funds and servicers.