Servicers are ready to launch a "crackdown" with foreclosures and auctions targeting those who are behind on their payments under out-of-court settlement agreements.
Under a proposed legislative amendment put out for public consultation by the Ministry of National Economy and Finance, servicers will very soon be able to proceed with expedited enforcement procedures against this category of delinquent borrowers.
Lost among proposed regulations favorable to debtors (such as the provision for better protection of the primary residence through the liquidation of the debtor’s remaining assets) is a provision with convoluted legal wording, which nevertheless brings about massive changes in the daily lives of those who settled their debts through the Out-of-Court Settlement but are already struggling to pay.
With this provision, as legal experts explain to Euro2day.gr, a creditor will no longer need to follow the costly and time-consuming process of issuing a payment order. The restructuring agreement itself will constitute what lawyers callan “enforceable title,”and the creditor will be able to automatically proceed with enforcement measures, such as seizures and real estate auctions against the debtor, co-debtors, and guarantors.
The government will forgo significant revenue from the fees it collects for issuing payment orders. However, the government accepted this cost, as it agrees with the financial institutions that settlements through the Out-of-Court Mechanism have now increased significantly, and with them, payment defaults are also rising, which were deemed to require a more drastic response.
It should be noted that, based on data from April 2026, successful debt settlements through the Out-of-Court Mechanism had exceeded 60,000, amounting to nearly 19 billion euros. Of these, 31,500 settlements also include debts to financial institutions. Unofficial estimates put the number of settlements already in default at over 15%. Furthermore, a large number of debtors are paying… with great difficulty, meaning they are consistently behind on their repayment schedule but have not yet reached a definitive default.
Legal experts estimate that these problems are not unrelated to the weaknesses of the Out-of-Court Settlement process itself, the main one being the generation of settlement proposals that appear unsustainable from the outset (excessive amounts relative to the debtor’s financial capacity), which, however, many debtors end up accepting to prevent foreclosure and buy time.
Automatic Foreclosures
The Ministry of National Economy and Finance is implementing a pivotal change that will drastically accelerate enforcement procedures (seizures, foreclosures) for borrowers who default on the terms of the Out-of-Court Settlement: the settlement agreement itself is now being turned into a “weapon” in the hands of servicers and banks.
The core of the change lies in the addition of paragraph 3 to Article 27 of Law 4738/2020, which overturns the existing legal framework for dealing with those who stop making their payments.
Until now, if a debtor defaulted on the terms of the Out-of-Court Settlement Mechanism, the creditor had to go to court to obtain a payment order in order to proceed with enforcement measures.
Under the proposed regulation, the restructuring agreement itself is now automatically recognized as an enforceable title (under the Code of Civil Procedure) for debts owed to financial institutions. In practice, this means that a time-consuming legal step is bypassed. Creditors can obtain the so-called “writ of execution” (i.e., the authorization to initiate enforcement) free of charge and through expedited procedures from the judge.
What changes in practice for debtors
The regulation tightens the framework for borrowers who are unable to meet their obligations. Specifically:
- If the debtor leaves unpaid installments that cumulatively exceed the value of 3 installments (or 3% of the total restructured amount), the restructuring is lost. At that point, the creditor can go directly to court, obtain a court order, and immediately proceed with account seizures or property auctions.
- With the loss of the settlement, the “haircut” and the favorable terms are canceled. The debt reverts to the amount it was before the out-of-court agreement was signed (minus only the amounts paid in the meantime) and becomes immediately due and payable.
- The contract—which serves as an enforceable title—immediately allows creditors to register a preventive attachment and a preliminary mortgage on the debtor’s property to secure their claim.
The legislative intervention contains two additional important details that broaden its impact:
- The new rule will not apply only to those who sign out-of-court agreements from now on. It will also apply to existing agreements, provided that the breach of the agreement (i.e., the cessation of payments) occurs after the new law is enacted and implemented.
- The enforceability of the writ of execution is not limited to the primary debtor alone. It applies equally to guarantors or co-debtors who have signed the restructuring agreement, thereby placing their own assets at immediate risk of liquidation.
The debtor’s defenses
However, as legal experts point out, the debtor is not entirely unprotected, even though the procedures initiated by creditors are being drastically simplified and expedited. The bill explicitly states that “all legal remedies provided for under current legislation are permitted.”
When a debtor realizes that the repayment plan is “falling apart” (i.e., approaching or exceeding the threshold of three missed payments), their options are divided into legal defenses against enforcement and alternative strategies:
- When the creditor receives the “notice” and sends the writ of execution (i.e., the document warning of seizure or auction), the debtor must act immediately to file an objection (pursuant to Article 933 of the Code of Civil Procedure). A common legal loophole in this case involves errors in calculating the amount of the debt, as servicers often add excessive interest or fail to properly deduct amounts the debtor has already paid. Additionally, the debtor may invoke an abusive exercise of rights (e.g., if they paid 80% of the settlement but missed 3 installments due to a serious health problem). In any case, the objection must be accompanied by a motion for a stay of proceedings (pursuant to Article 938 of the Code of Civil Procedure), requesting that the auction be “frozen” until the objection is heard.
- In addition to these legal defenses, the debtor may avoid the courts and, provided the inability to pay is genuine and permanent, enter into direct negotiations with the creditor for a new, personalized bilateral agreement. If the debtor meets the strict income and asset criteria for being classified as “vulnerable” and their primary residence is at risk, they may apply to join the Acquisition and Lease-Back Agency (which will soon become fully operational). The agency purchases the home, the debtor remains in it while paying rent (which is subsidized by the state) and has the right to repurchase it after 12 years. In the worst-case scenario, the debtor may file for bankruptcy (under Law 4738/2020). Their assets (if any) will be liquidated, but within one to three years they will be permanently discharged from all their debts, gaining a “second chance” to start their life free of financial burdens.
In any case, lawyers advise debtors facing an “onslaught” from servicers not to waste any time. The debtor, they emphasize, must act before the writ is issued and the foreclosure process begins, as under the new legal framework, creditors’ responses will now be extremely swift.