Despite the government’s efforts to create a more favorable institutional framework for debt settlement unsecured debtors from extrajudicial mechanism, The latest data shows that a new problem has emerged related to the negative attitude of financial institutions (banks and service providers). With very high percentages, reaching 80%, vulnerable debtors themselves reject out-of-court settlements because they are unprofitable for them.
The Ministry of Finance, trying to see the glass half way, emphasizes that “arrangements are now also made for vulnerable debtors, based on the latest law, which provides: mandatory admission on proposing an out-of-court settlement by creditors. In particular, the first 374 adjustments of this category have been implemented.
In fact, however, success rates Out-of-court settlements for vulnerable debtors are alarmingly low, leaving the supposedly financially weak with no means to repay their debts. In particular,
- There are a total of 2104 debtors who met the criteria of the “vulnerable” classification law and submitted claims to the state and banks to repay their debts through an extrajudicial mechanism.
- Approximately 30% of those applications (644 in total) reached the final stage, that is, the debtor received a settlement offer through the algorithm of the extrajudicial mechanism and he and the creditors responded.
- Out of 644 applications, only 374 were successfully completed, that is, the creditors and the debtor agreed and the debt was paid off. In the case of 270 applications (more than 40%), the process was unsuccessful.
- As explained by the General Secretariat of Private Debt, the bad result of 78.5 percent of the applications is caused by the debtors who rejected the agreements. 65.93% of the cases of unsuccessful outcome refer to the debtor’s refusal to settle as a result of multilateral negotiations.
- Regarding the rest of the applications, which were theoretically supposed to be accepted by the creditors under the new legislation, the General Secretariat of the State Debt notes: have been rejected by the state and funding agencies because they are not within the scope of the law.
In any case, as jurists point out, the unsolved problem is that the out-of-court mechanism with high interest rates leads to offers of arrangements for vulnerable borrowers that exceed their financial capabilities. In fact, because joining a vulnerable status provides temporary protection from a first home auction, many vulnerable borrowers avoid agreeing to an arrangement they may not be able to service.
It should be noted that the Ministry of Finance has decided expands the range of debtors considered vulnerable; A provision included in his latest bill stipulates that citizens with disabilities will be included in the indigent class with more lenient income and property standards than other debtors.
Waiting now Joint decision of the ministers by the Ministers of National Economy and Finance and Social Cohesion and Family, which will determine the details of the issuance of the vulnerable debtor certificate, as well as the level of incapacity and the income and property criteria that will be included in the definition of insecure debtors. .
