A new legislative regulation provides a way out for thousands of citizens and businesses with debts to municipalities, as it explicitly removes the current obstacle that excludes from the extral mechanism debts for which enforcement or safeguard measures had already been imposed.

Although debts over 10,000 euros to municipalities could already be subject to the extrajudicial mechanism, in practice, the existence of seizures acted as a “cutter”, leaving a large part of the debts out of regulation.

Article 35 of the draft law “Regulations for the human resources of the public sector, Civil Society Organizations, the strengthening of local government, the National Register of Companion Animals and other provisions”, submitted to the Parliament, amends Article 26 of Law No. 5143/2024 and updates the framework of the extrajudicial mechanism for debts to local authorities. The regulation does not change the threshold for the inclusion of debts over 10,000 euros, but it explicitly provides that these debts are no longer excluded from the regulation, even if seizures or other enforcement measures have already been imposed.

In the same context, it is clarified that the entire debt – principal amount, fines and surcharges, is ascertained at the Tax Administration and, exclusively for the out-of-court settlement, is considered as a debt to the Public Sector, without changing the general status of municipal claims. In the event of successful progress of the settlement and collection of amounts, the ADE will withhold 5% and pay the remainder to the beneficiary municipalities or their legal entities within 60 days of collection, instead of the 30 days that applied until now.

A key element of the new provision is that the existence of coercive or protective measures no longer prevents the submission of an application for inclusion in the out-of-court mechanism. After the final submission of the application, the rules for the suspension of enforcement measures that apply to other creditors also apply to municipalities, while the conclusion of a settlement agreement provides for the lifting of seizures and safeguard measures already taken.

The regulation is accompanied by clear safeguards. If the restructuring agreement is annulled or overturned, the enforcement measures are reinstated, and the municipalities proceed again to take enforcement and safeguard measures to collect the debts. At the same time, if a third party accelerates enforcement, the municipalities or their legal entities are normally notified as creditors, retaining the exclusive competence to administer the enforcement measures.

It is expressly provided that the out-of-court mechanism cannot be subject to debts that have lapsed or are about to lapse within a period of less than one year, as well as cases where the total amount of the applicant’s debts to each municipality or legal entity, including surcharges, is less than 10,000 euros. The municipalities are informed by the Municipality of the inclusion of their claims in the mechanism, the progress of the arrangement, the outstanding balance of the debt or any loss of the arrangement.

On a practical level, the regulation concerns citizens and businesses with accumulated claims from municipal cleaning and lighting fees, fines for urban planning or municipal violations, leases of municipal real estate, fees for the use of public spaces, and other confirmed debts, which until now often “stuck” in seizures without leading to effective collection. Now, these debts can be settled even if they are already in the process of enforcement, provided that the settlement is complied with.