Changes To Greece’s Out-of-Court Debt Workout Mechanism — And How The Government–Servicer Compromise Was Probably Reached

A few days ago, the Greek Parliament passed significant amendments to the out-of-court debt workout mechanism concerning the protection of a debtor’s primary residence, implementing measures previously announced by the Government (Law 5313/2026).

The reform introduces two particularly important changes.

1. Protection of the primary residence combined with liquidation of other assets

The first change concerns the possibility of preserving the debtor’s primary residence while liquidating the remainder of their assets.

In a previous interview, Minister Pierrakakis had presented this as a matter of debtor choice:

“People tell us: ‘I want to protect my home, my primary residence. Not everything else. I may want to liquidate the rest myself, so that I can repay my debts more quickly and get back on my feet, both personally and as a family.’”

In practice, however, what was initially presented as a debtor-friendly option appears to operate rather differently.

Under the new framework, a Servicer may submit a restructuring proposal that protects only the debtor’s primary residence while requiring the liquidation of the debtor’s other assets.

The key issue is that, before the new legislation, Servicers were obliged to submit a restructuring proposal to vulnerable or eligible debtors without making the liquidation of all remaining assets a mandatory condition. Under the new regime, such proposals may now be linked to the compulsory liquidation of the debtor’s other property.

For debtors falling outside the vulnerable or eligible categories, the position may be even less favourable. The legislation does not require Servicers to offer protection of the primary residence. It merely provides that they “may” do so.

Even under the previous framework, a debtor who accepted a restructuring arrangement involving instalments beyond their financial capacity could, of course, choose to sell other assets voluntarily and apply the proceeds towards the repayment of creditors. Such a voluntary sale would also normally offer the possibility of achieving a higher market price than a forced-sale procedure.

The new legislation, however, appears to contemplate liquidation on the basis of property values assessed by the Servicer and recorded in the out-of-court mechanism platform, without providing the debtor with a judicial route to challenge that valuation.

In substance, therefore, the choice may no longer lie primarily with the debtor. Instead, the Servicer may be placed in a position to determine whether other assets should be liquidated and at what valuation, within an accelerated process.

One possible response is that such liquidation can only take place if the debtor accepts the restructuring proposal. Formally, this is correct: the debtor must consent to the arrangement.

The practical question, however, is what realistic alternative remains if the debtor rejects it. The debtor may then face either the forced liquidation of all assets through enforcement and auction proceedings or lengthy and costly litigation against the Servicer.

From the Servicers’ perspective, the new framework also creates an obvious advantage: the rapid liquidation of non-primary-residence assets may generate immediate recoveries. If the debtor later fails to comply with the arrangement protecting the primary residence, enforcement against that residence may then follow, particularly in light of the second major amendment introduced by the law.

2. The restructuring agreement becomes an enforceable title

The second major change concerns the legal status of the restructuring agreement concluded through the out-of-court mechanism. Under the new law, the restructuring agreement itself becomes an enforceable title. This allows Servicers, in the event of default, to proceed directly with enforcement measures, including seizures, without first obtaining a court judgment or payment order. The new framework also enables the registration of additional prenotations of mortgage over the debtor’s assets.

This has long been an objective of Servicers, as the need to obtain a court judgment or payment order inevitably added time and procedural cost to the enforcement process.

Under the new regime, a Servicer will no longer need to obtain a separate enforceable title from a court. The restructuring agreement generated through the platform may itself serve as the legal basis for enforcement if the debtor fails to comply with the agreed terms. The significance of this amendment should not be underestimated. Historically, outside judicial decisions themselves, comparable enforceability was associated principally with notarial instruments. Although debtors retain the right to challenge individual enforcement measures through the remedies available under enforcement law, they will no longer be able to challenge a payment order itself, for the simple reason that no payment order will need to be issued. Enforcement will proceed directly on the basis of the restructuring agreement.

The same provision also enables Servicers to register additional prenotations of mortgage over a debtor’s assets, whether already encumbered or otherwise, without first obtaining a judicial decision.

This, too, reflects a longstanding request by Servicers: the ability to obtain additional security over debtors’ assets within the framework of the out-of-court mechanism.

Most importantly, these provisions also apply to restructuring agreements that were concluded before the new law entered into force.

During the parliamentary debate, the majority sought to justify the amendment on the basis that:

“At the same time, the restructuring agreement acquires the force of an enforceable title, thereby strengthening legal certainty and improving the functionality of the out-of-court mechanism.”

That explanation, however, addresses only one side of the legal and commercial consequences of the amendment.

3. Vulnerable and eligible debtors: thresholds that remain unchanged

A further important point concerns the cases in which the outcome of the out-of-court mechanism is effectively binding on Servicers. This applies primarily to vulnerable and eligible debtors.

For a single-person household, vulnerable-debtor status is based on an annual income below EUR 7,000 and a total taxable property value below EUR 120,000. The relevant thresholds are doubled for eligible debtors, subject in that category to an overall debt ceiling of EUR 300,000.

What is particularly striking is that these income thresholds derive from the 2012 Household Budget Survey, published by ELSTAT in December 2013.

Fourteen years later, they remain essentially unchanged.

This is significant because even a modest upward revision of the thresholds would expand the number of debtors for whom Servicers would be required to offer restructuring solutions. That, however, would be difficult to reconcile with business plans based on relatively rapid recoveries, often within seven to ten years, rather than the much longer repayment horizons — in some cases 15 to 35 years — contemplated by the out-of-court mechanism.

4. What was ultimately exchanged in the Government–Servicer negotiations?

Taking all of the above into account, it appears highly likely that the recent reform reflects a broader compromise reached between the Government and the Servicers. On the one hand, Servicers obtained a particularly powerful enforcement tool: the restructuring agreement itself is now an enforceable title. At the same time, the eligibility thresholds for vulnerable and eligible debtors were not materially expanded, despite the impact of inflation and the substantial change in economic conditions since those thresholds were originally determined. On the other hand, the Government presented the possibility of preserving the debtor’s primary residence as an important protective measure.

Yet that protection is itself subject to significant qualifications.

For many debtors, protection of the primary residence remains at the Servicer’s discretion. It may also be accompanied by the mandatory and immediate liquidation of the debtor’s remaining assets, for the benefit of creditors, at values determined within a process in which the Servicer itself plays a central role.This leads to the central question raised by the reform:

What, in substantive terms, did the Government actually receive in return?

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