A new model in the out-of-court debt settlement process provides substantial protection for the primary residence, opening the way for larger “haircuts” and lower installments calculated exclusively on the property being preserved.

The regulation announced by the Minister of National Economy and Finance, Kyriakos Pierrakakis, changes the core of the mechanism, aiming to turn the out-of-court process into a genuine tool for protecting the primary residence. Until now, debtors could not separate their home from their other assets and income, resulting in smaller “haircuts” and higher installments.

The new intervention fills this gap, offering for the first time the possibility of choice: the debtor will be able to declare that they want to protect only their primary residence, even if they choose to liquidate other assets in order to settle their debts faster and under more sustainable terms.

In practice, the regulation being developed by the General Secretariat for Private Debt provides that the proposal will be generated via an algorithm that considers only the value of the primary residence—either its market value or the official tax value (ENFIA), whichever is higher—and not the total assets. Thus, the installment and “haircut” will essentially correspond to the value of the property and the debtor’s income, leading to significantly lower monthly payments and larger debt reductions, especially in cases where the home’s value is lower than the total amount of debts.

The new framework comes with a clear and binding condition: the liquidation of other assets is integrated into the restructuring agreement and will be conducted electronically through the e-auction process. This addresses the problem of properties remaining “frozen” without buyers, which had significantly burdened the final settlement proposal.

The debtor will have the right to accept or reject the proposal generated by the mechanism. If accepted, a restructuring contract will be drawn up, providing for the gradual repayment of the primary residence’s value to the financial institutions, with the property’s preservation depending on adherence to the terms of the arrangement.

The philosophy of the intervention follows the basic principle of all previous home protection tools—that is, the gradual repayment of the property’s value—but in a more functional and faster framework, aiming to give thousands of debtors a real second chance to settle their debts and secure their homes.