Legal Insight
January 2026
George Kefalas, LLM mult., MSc., PgCert
(republished from nbdaily.org)
Summary: The out‑of‑court settlement mechanism has emerged as a key tool for businesses in restructuring their debts, particularly in relation to the Greek State and e‑EFKA (the Social Security Fund). According to recent data, more than 40% of settlements with e‑EFKA have been achieved via this mechanism. But what are the core rules governing the settlement process? What is the procedure and timeline for concluding a restructuring agreement? What protections and benefits does the debtor receive upon signing the agreement? And how can a settlement ultimately be lost? This article addresses these questions through 10 concise Q&As.
1. Which debts can be settled through the out‑of‑court mechanism?
Debts owed to the Greek State and/or e‑EFKA that have been assessed as of the date of the application submission can be restructured through the out‑of‑court mechanism. Additionally, debts to municipalities can be included, provided they have been recorded in the collectible revenue accounts of the Independent Authority for Public Revenue (AADE) in accordance with Article 26 of Law 5143/2024 and Joint Ministerial Decision 10250/13.2.2025.
2. Is debt deletion permitted under the out‑of‑court mechanism?
The out‑of‑court mechanism does not allow the deletion of principal liabilities arising from withheld and imposed taxes or social security contributions. Principal liabilities from other taxes and standalone penalties may be written off at a rate of up to 75%. Principal liabilities from fines may be written off at up to 95%, and interest and surcharges at up to 85%, depending on the debtor’s repayment capacity (see Article 71(2) of Law 4738/2020 and Article 3(2) of Joint Ministerial Decision 66468/2021). Whether a write‑off is granted and to what extent depends on the debtor’s ability to pay.
3. How long does the settlement process with the State and e‑EFKA take?
Under Article 5 of Joint Ministerial Decision 66468/2021, the settlement proposal from the State and e‑EFKA must be submitted (separately by each entity) within 55 days from the application date in a multilateral process, or from the unsuccessful completion of the multilateral process in a bilateral process. In practice, however, there are significant delays in proposal submission by public entities. The debtor must accept the proposal within five calendar days from its submission.
4. What are the main repayment terms under the out‑of‑court mechanism?
Debts may be restructured into up to 240 monthly instalments. The number of instalments depends on the debtor’s repayment capacity. Monthly payments cannot be less than EUR 50. Instalments carry a fixed annual interest rate of 3% (Article 22(a) of Law 4738/2020 and Article 3(2) of Joint Ministerial Decision 66468/2021).
5. Is enforcement suspended upon the final submission of the application?
Upon the final submission of the application, measures of compulsory enforcement and criminal prosecution for non‑payment of debts and social security contributions are suspended. This suspension lasts until the process is completed in any manner. The two‑month period set out in Article 16 of Law 4738/2020—which deems the process unsuccessful if a contract is not signed within that time—does not apply when a request for correction or supplementation of application data has been submitted that extends beyond this period (see Single‑Member Administrative Court of First Instance of Athens Decision 1130/2025).
6. What happens to third‑party garnishments after submitting an application?
After final submission, the State and/or e‑EFKA may not impose garnishments on third parties. If such a garnishment is imposed, the competent authority must automatically lift it and return to the debtor any amounts paid by the third party. However, if the garnishment was imposed prior to final application submission, it will continue to apply to future receivables, including amounts credited to accounts after the start of the suspension (see Decision E. 2065/2022).
7. How is the debtor’s capacity to pay calculated?
The calculation method is described in detail in Joint Ministerial Decision 67360/2021 (see Article 8A et seq.). Key parameters include:
The maximum repayment capacity derived from the debtor’s tax data, the debtor’s declared monthly capacity, and
The minimum recovery amount each creditor would receive from liquidation of the debtor’s assets.
The minimum amount a creditor can receive through the out‑of‑court mechanism is the amount they would recover from liquidation.
For natural persons with business activity and small legal entities (turnover less than EUR 2.5 million in each of the last three fiscal years), there is a presumed income equal to 10% of turnover.
8. When does the out‑of‑court settlement take effect?
In the bilateral process, the restructuring agreement is considered concluded when, after the debtor accepts the proposal, the first instalment is paid. The first instalment must be paid to the State within five working days from the debtor’s acceptance, and to e‑EFKA within five working days from acceptance and no later than the last business day of the following month (see Article 5(5) and Article 4(6) of Joint Ministerial Decision 66468/2021). In practice, this five‑day period begins when the debtor receives the payment reference from the relevant authority.
In the multilateral process, the agreement takes effect once the State and/or e‑EFKA has given consent through the platform, which is deemed granted if no response is given within 15 working days from notification. The first instalment may be paid by the last business day of the following month (see E. 2065/2022).
9. What are the benefits of settling debts to the State and e‑EFKA via the out‑of‑court mechanism?
Key benefits for the debtor include:
Stable 3% interest rate and the possibility of long‑term restructuring with write‑offs of surcharges, fines, or even principal.
Issuance of tax and social security clearance certificates, provided there are no other outstanding unarranged debts.
Suspension or cessation of criminal prosecution for non‑payment of debts and social security contributions.
Suspension of enforcement measures and continuation of compulsory collection.
Possibility to neutralise third‑party garnishments (release regarding future receivables).
10. When is the out‑of‑court settlement lost?
A settlement may be lost in the following situations (Article 10 of Joint Ministerial Decision 64468/2021):
Failure to pay instalments until the total equals three instalments.
Failure to submit income tax returns, VAT returns, and social security contribution declarations within three months after their due date.
Failure to settle existing overdue debts within 90 days of the agreement, or debts that become overdue thereafter within 60 days of their due date.
In bilateral settlements, loss of settlement occurs automatically; in multilateral settlements, it occurs after a formal notice of termination.
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