The landscape is changing regarding debts to the State, non-performing loans, frozen bank accounts, and protection of the primary residence. From this month, the new framework of measures by the Ministry of National Economy and Finance is being activated, providing real relief to thousands of households, as well as a restart opportunity for small and medium-sized enterprises that are suffocating under debt.

The new options now opening up for debtors are numerous and combinable, in order to address multiple problems. In practice, anyone who has reached a level of over-indebtedness usually does not face a single open front, but many simultaneously.

The measures

Thus, although attention is mainly focused on the arrangements for 72 instalments or on non-performing loans and whether these could be even more generous, in practice what matters more is that all the new measures operate together at the same time.

For example:

• with the increase of the non-seizable threshold to €1,600, from July and every month, more than 1.7 million households and businesses will immediately gain €350 in liquidity.

• if the €4,200 they gain additionally per year does not solve their problem, they can be fully exempted from seizures for tax debts by immediately paying just 1/4 of their debts that had been subject to enforcement measures, while at the same time placing the remaining debts into a settlement to repay them in instalments.

• if the 24 instalments of the standard arrangement are not enough—because they are burdened by many other past debts and the monthly instalments become large—then they can be included in the 72-instalment scheme, in order to pay smaller monthly amounts.

• if even 72 instalments are not sufficient, they can extend them to 100 or even 200, as from the end of July, more than 2 million small debtors with debts from €5,000 to €10,000 will be able to join the Out-of-Court Mechanism, who until now were excluded from “haircuts” and the 240 or 420 instalments for public sector or banks respectively.

• for those who have already fallen into complete deadlock and can barely service judicial arrangements they had entered into in order to save their home, the instalment they pay is being drastically reduced.

• for those who are one step further and are in immediate danger of losing their home through auction, in September a new possibility opens for protection of their primary residence through the Out-of-Court Mechanism.

The changes in the Out-of-Court Mechanism are perhaps the largest and most permanent intervention attempted by the Ministry of National Economy and Finance with this new package of measures: it addresses all debts in totality and not individually, providing a holistic solution to debtors.

It is no coincidence that the Minister of National Economy and Finance, Kyriakos Pierrakakis Kyriakos Pierrakakis, now describes the Out-of-Court Mechanism as a “super-weapon” for managing private debt, while also announcing further interventions in the near future.

What is beneficial and for whom

The new measures, among which households and businesses are called to choose which to use and how, are now beginning to be implemented after the passing of the omnibus bill of the Ministry of National Economy and Finance.

Specifically:

1) 72 instalments for old debts

For those who owe only to the State (Tax Office, customs, social security funds), the first and most immediate solution is the 72 instalments. The new arrangement concerns overdue debts created up to the end of 2023 and provides greater relief than the standard 24-instalment arrangement.

The relief mainly concerns old debts, from the period of the pandemic and the major energy crisis of 2023: the debtor will be able to choose more instalments in order to have a much smaller monthly payment. For €18,000 owed to the State, a debtor who today must pay around €750 per month under the 24-instalment standard arrangement will be able to distribute the debt into up to 72 instalments and reduce the monthly burden to around €250, plus interest.

For a worker with an income of €1,400 or €1,500, this difference is significant. Very often, it is the difference between “remaining compliant” and “losing the arrangement again.”

The same applies to a small business with debts to EFKA and VAT. Thanks to the ability to spread the amount over more instalments, the debtor can maintain tax and insurance clearance, avoiding new seizures.

In any case, the 72-instalment scheme is a “one-off” arrangement. The application deadline ends on 31 December 2026, while settlement of any other debts incurred from 1 January 2024 onwards is also required. Thus, the 72 instalments do what every extraordinary arrangement promises: they do not solve everything, but they provide greater flexibility for those with debts to the State to cover other needs.

2) Frozen bank accounts

For many professionals, the biggest daily problem is not only the debt. It is that they cannot even operate. Money comes in, but the account is blocked. And without an account, there is no business.

Here comes the new possibility of lifting the seizure. If the debtor pays 25% of the debt and arranges the rest, they can request that their account be unblocked. This is important for a self-employed person who lives off their receipts.

For example, a trader with a €20,000 debt can pay €5,000, arrange the remaining €15,000, and request the release of their account. The same applies to a small business that needs to regain liquidity for suppliers, salaries, and operating costs.

Currently, 1.7 million taxpayers live with the problem of frozen funds due to seizures already imposed (excluding those under enforcement measures for debts to EFKA, banks, or individuals), while another 2.4 million taxpayers are next in line as they are in the pre-seizure stage for debts over €500, for which seizures may eventually be imposed but have not yet been enforced.

However, immediate relief will be provided to all these debtors, as another provision increases the non-seizable threshold in bank accounts from €1,250 to €1,600 for debts to the State.

Thus, an additional €350 per month is released. The non-seizable threshold is also increased for debts to private individuals and banks: from €1,500 to €1,600 (as with the State), and from €2,000 to €2,200 for joint accounts with more than one beneficiary, ensuring an additional €100–€200 in available monthly income or €1,200–€2,400 annually.

3) Out-of-court mechanism: instalments and “haircuts” for debts under €10,000

When debts are not only to the Tax Office and funds, but also to banks, credit cards, or loans with servicers, then the Out-of-Court Mechanism remains the most complete “all-in-one” solution: one application, one proposal, one overall settlement.

The most important change is that the entry threshold falls from €10,000 to €5,000. This opens the door to more than 1 million small debtors who were previously excluded.

The new provision becomes active at the end of July. With a minimum instalment of €50 per month, a public debt can be “written down” and settled in hundreds of instalments on a permanent basis—something that many previous extraordinary arrangements did not do.

4) Protection of residence

The most sensitive change concerns the protection of the primary residence. For the first time, the primary residence enters a separate protection zone within the Out-of-Court Mechanism. Until now, the settlement proposal was determined by the debtor’s total assets, income, and total obligations. Under the new regime, the home will be treated in a much more targeted way.

The measure is based on the following logic: as with the old Katseli law (Law 3869/2010), the debtor will be able to exclude their primary residence from liquidation.

The Out-of-Court platform—like the former courts of peace—examines what other assets the debtor has and allows them to request protection of their home, repaying what they can with whatever income remains.

In the Out-of-Court Mechanism things are better: from September, if someone owes a bank €150,000 but has, for example, two or three plots of land, they may, if they wish to protect their residence (e.g. worth €100,000), choose when submitting their application to separate the home from the rest of their property.

Then the debt is reduced to €100,000 or less (deducting any plots they choose) and will be repaid in up to 420 instalments (35 years), significantly reducing both debt and monthly payment, also because the algorithm of the Out-of-Court Mechanism will treat them as poorer than they are today, having both a home and plots of land.

5) The Katseli law is being rewritten

The heaviest legacy of the crisis Greece experienced was the large debts left by those who lost almost everything and are trying to save at least the home they purchased with a loan. This concerns the re-regulation of Law 3869/2010, known as the Katseli law.

For those with active judicial arrangements, the way interest is calculated changes immediately. Now interest is applied to the monthly instalment rather than the total outstanding loan balance. This alone drastically reduces the cost of the arrangement.

For those who were paying for years more than they should have under the old method, the State also provides retroactive correction. Excess amounts are recognised as principal and deducted from the final instalments. Thus, the loan is closed earlier and with a lower burden.

What happens in practice?

Here is a real example: a borrower applied under Law 3869/2010 to protect their primary residence from auction. The case was heard in 2024. By 2022, they had reached a debt of €405,000 for loans taken and guarantees given between 2005 and 2008.

The court ruled that their income (€3,600 per month in 2008) was sufficient for loan repayment, but from 2011 it decreased, and in 2014 they became unemployed.

Seeing that, apart from the residence, they had no other assets to liquidate (property, vehicles, etc.), the court took into account the low income of both the debtor and their spouse and decided to exempt the home from auction.

To save it, it imposed on the debtor the obligation to pay €45,000 (writing off the remaining €360,000) in 240 instalments over 20 years, with a monthly instalment of €187.5. However, as provided by the Katseli law, it ordered that payment be made with interest, based on the average weighted mortgage rate (3.6% annually).

What does this mean?

• Under the amortisation method of calculating payments that the ambiguity of the law allowed to be applied (i.e. interest on the total debt over 20 years), the debtor would pay €263 per month for 240 months. Over 20 years, they would have paid €63,120, of which €50,000 would be principal and about €13,120 interest.

• With interest calculated monthly on the instalment, however, as will now be the case for those with active judicial arrangements, the instalment falls to €188: €187.5 for the debt and only €0.5 interest. Consequently, at the end of the 240 instalments, the total paid would be €45,000 principal and only €120 interest, or €45,120 in total. With this method, 99% of interest is eliminated—almost as if the 2010 law provided for interest-free repayment.

5+1) Retroactive effect for excess payments

The provision introduced by Pierrakakis also applies retroactively: any excess payments reduce the final instalments.

In the same (real) example, in 2024 the court granted the debtor a suspension of payments for the first three years (zero monthly payments up to now). So they did not pay anything, and nothing will be refunded.

However, if the debtor had started repaying under the first interest calculation method, they would have been paying €75 more per month for the past two years, or €1,800 more so far.

The excess payments of €1,800 correspond to 9.5 monthly instalments of €187.5 that the court set. These are deducted from the final instalments, meaning the debt would be completed 10 months earlier than the court-set 20-year period.

The provision, however, applies only to active cases. Those who have already lost their arrangement or have fully repaid their debt are not included in the process.