Legal Insight
November 2025
George Psarakis LL.M. (mult.), PgCert
(republished from Euro2day.gr)
Summary: The most common cases in which a debtor is brought back to court. When they are justified, what happens in courtrooms, and the critical criterion of “honesty.”
About five years ago, the Greek legislator incorporated the EU Directive (EU) 2019/1023 and the institution of the “Second Chance” into the Greek Bankruptcy Code (Law 4738/2020). The core idea is this: debtors are now given the opportunity to file for bankruptcy with the aim of being fully discharged from their debts within a period of 1 or 3 years (alongside liquidation of any assets).
The ultimate goal is a new, “clean” start.
However, the liberalization of discharge does not mean amnesty for every type of behavior. The “second chance” is strictly intended for the “honest” debtor. For this reason, creditors may file objections, citing, among other things, fraudulent bankruptcy or bad faith behavior by the debtor, in order to prevent the discharge.
Thus, the concept of the “honest” debtor becomes the system’s most critical safeguard, separating legitimate business failure from fraudulent management and bad-faith inability to pay.
There are three main categories of debtor behavior that lead courts to deny discharge:
a. Fraudulent cause of inability to pay
In such cases, the debtor either deliberately causes their own insolvency or anticipates and accepts it as part of their planning. A characteristic example is a case from the Patras Multi-Member Court of First Instance (246/2023), which denied discharge after finding that:
The debtor withdrew cash from the company’s funds without justification shortly before filing for bankruptcy.
They failed to file for bankruptcy promptly after identifying insolvency.
Similarly, the Piraeus Court of Appeal (no. 393/2024) ruled that systematically withholding employee contributions and failing to remit them, while the business was still operational, was grounds for denying discharge. The amounts reached several million euros, and the debtor had multiple convictions for non-payment of social insurance contributions, often paying only the first installment of any debt arrangement with EFKA before defaulting.
b. Lack of cooperation with bankruptcy authorities
The “second chance” requires the debtor to cooperate with the trustee and other bankruptcy bodies. Apathy or failure to communicate can lead to discharge being denied. According to the Athens Court of Appeal (ruling 2326/2023), discharge is not granted when the debtor:
Abandons the company’s assets and fails to hand them over to the trustee.
Fails to deliver the commercial books, making auditing impossible.
Does not maintain timely communication with the trustee.
c. Criminal involvement
Convictions for crimes such as bankruptcy fraud, aggravated fraud, or embezzlement are serious reasons to deny discharge.
On the other hand, the following elements support a finding of the debtor’s “honesty”:
a. General economic crisis
In a recent ruling, the Thrace Court of Appeal (30/2025) dismissed EFKA’s appeal, ruling that the bankruptcy was due to the widespread economic crisis affecting the industry, declining revenues, and business closures—rather than fraudulent acts by the debtor.
Similarly, the Ioannina Court of First Instance (42/2024) found that the debts in question stemmed from the recent economic downturn and the debtor’s low income and family obligations.
Efforts to settle debts, even if unsuccessful, were also viewed as signs of good faith. This was also the conclusion of the Ioannina Court of Appeal (42/2024), which ruled that although the bankrupt company failed to comply with eleven (11) debt arrangements with EFKA, this did not amount to fraud. Instead, it demonstrated an effort to manage debts, with non-compliance resulting from the deteriorating financial situation despite genuine attempts by the company’s president.
b. Cooperation with the trustee
A key indicator of “honesty” is the debtor’s cooperative attitude throughout the bankruptcy process. As noted by the Thrace Court of Appeal (30/2025), one reason the appeal was rejected was that the debtor “was cooperative throughout the bankruptcy process, in particular presenting the commercial books, assisting in the inventorying of the bankruptcy estate, and attending all related proceedings.”
Recent case law creates a clear framework: discharge through bankruptcy is the rule—but not without conditions. To successfully defend against a creditor’s appeal, the debtor and their legal counsel must focus on two pillars: full cooperation with bankruptcy authorities and a well-substantiated explanation of insolvency that rules out fraud or bad faith. Linking the inability to pay to external factors (crisis, pandemic, cost hikes, intense competition, etc.) remains a strong defense against creditor objections.
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