Debtors who, in addition to their primary residence, own other assets are expected to benefit the most from the regulation announced by Minister of National Economy and Finance Kyriakos Pierrakakis, as for the first time they will be able to separate their home from the rest of their assets and achieve lower installments and larger “haircuts.”

Today, under the out-of-court mechanism, all assets are treated as a single whole, meaning that the existence of additional properties “inflates” the settlement and leads to more limited write-offs and higher monthly burdens.

Under the current regime, whether it concerns a primary residence or secondary properties, everything is taken into account in the debtor’s overall financial picture, along with their income. This means that even if someone wants to protect only their home, they cannot isolate it, and the settlement is therefore shaped based on total assets.

With the new intervention, this logic changes. The debtor will be able to choose to save exclusively their primary residence and leave out the remaining assets, which may be liquidated as part of the settlement. In this way, the proposal generated will not be burdened by the existence of other properties.

In practice, the settlement proposal will be based on the value of the primary residence and not on the total wealth. The algorithm will take into account only the value of this specific property, provided the debtor selects it, with the value determined as the higher of the market value declared by the creditor in the system and the objective (tax) value (ENFIA). The installment and the “haircut” will be calculated in relation to this value and the total debt owed to financial institutions, especially in cases where the property’s value is lower than the total debt, allowing for greater write-offs and lower monthly payments.

Examples

Today, a debtor with a house and a holiday home, with a total value of €250,000 and debt of €200,000, will have their settlement calculated on the total value of their assets, leading to a higher installment and limited “haircut.” With the new regulation, they can choose to protect only their primary residence and allow the holiday home to be liquidated, so that the settlement is based solely on the value of the main house and becomes more “manageable.”

Similarly, in a case where the primary residence is worth €120,000 and total debt reaches €200,000, the new system can lead to a significant “haircut,” as the settlement will adjust to the property’s value rather than the total liabilities.

Closing

By contrast, for those who own only one residence, the situation does not change substantially. Even under the current framework, the settlement is based on the value of the single property and income, so the new option does not offer significant additional relief.

The process

The application process remains the same, with one crucial difference. The debtor submits an application to the out-of-court mechanism and chooses to save only their primary residence. This means the settlement proposal will include the liquidation of the debtor’s other properties, excluding the primary residence, with the liquidation incorporated as a term in the restructuring agreement and carried out electronically through the e-auction process. The debtor will have the option to accept or reject the proposal generated by the algorithm and, if accepted, a contract will be concluded providing for the installment plan to save the primary residence, subject to compliance with the terms, as well as the liquidation of the remaining assets.

The benefits of the regulation are mainly found in the ability to achieve significant write-offs and lower installments, especially when the value of the residence is lower than the total debt. At the same time, it ensures the protection of the primary residence through the gradual repayment of its value to financial institutions, following the logic of previous home protection tools. At the same time, it also provides a solution for secondary properties, which until now often remained unused while burdening the settlement, as they will now be liquidated through electronic auctions.