September 2025

Decision of the Athens Multi-Member Court of First Instance on the Discharge of a Guarantor for €1,300,000 Due to the Bank’s Fault in Debt Collection

The Athens Multi-Member Court of First Instance recently issued Decision No. 2483/2025. With this ruling, our client was released from their guarantor liability for an amount of nearly €1,300,000, alleged to be owed under a financial leasing agreement.

Specifically, the court found that due to gross negligence on the part of the creditor—a banking institution under special liquidation—it became impossible to recover the debt from the principal debtor, a real estate management company (in accordance with Article 862 of the Greek Civil Code). In essence, although the debtor had assets at the time the debt became due and payable, the creditor unjustifiably delayed the termination of the leasing agreement and the issuance of an enforceable title, allowing the debt to accumulate. As a result, the principal debtor managed to transfer high-value properties to third parties and terminate profitable lease agreements—assets and claims on which the creditor could have initiated enforcement proceedings, had it acted promptly.

Additionally, the court found that the creditor, despite repeated reminders from the principal debtor, failed to collect sublease payments that had been assigned to it as collateral. Consequently, the subtenants vacated the properties with outstanding debts, and—due to the assignment—the principal debtor was unable to pursue enforcement on its own.

The ruling states, verbatim: “The defendant demonstrated inertia and disregard for the collection of the claim during the same period—behavior that deviates unusually and significantly from that of a reasonably prudent and diligent person—by failing to terminate the contract in a timely manner, which would have prevented the over-indebtedness of the principal debtor. The latter ceased payments in 2011, yet termination only occurred in 2017, with a payment order issued five years later. The defendant focused exclusively on the claimant guarantor’s assets, neglecting to examine the financial status of the principal debtor’s real estate company. Had the defendant acted prudently, pursued the claim when it became due, and secured real guarantees on the debtor’s properties, it could have been satisfied before their transfer and from the rental income received by the debtor. Notably, the outstanding amount in 2011 from unpaid rents did not exceed €20,000. This finding is further supported by the fact that other creditors, who had registered liens, received the majority of the sale proceeds. The defendant’s delay and failure to take any enforcement measures against the principal debtor’s property—such as third-party garnishment, as it did with the claimant’s bank accounts—deprived it of the opportunity to seize sale proceeds received by the debtor. Therefore, the failure to recover the debt was due to the defendant’s own fault, and the claimant must be released from liability.”

This decision makes it clear that creditors—especially financial institutions—are accountable for their conduct in the debt recovery process. Any inaction or negligence on their part, particularly when it harms co-liable parties such as guarantors, may result in the loss of the personal security (guarantee) they would otherwise rely upon.

For more related cases and analysis, see here and here.