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May 2023

Judgment of the Magistrate's Court of Kropias on Second Chance for Debts of approximately 1 million Euro

Second Chance for Debts

The decision No. 43/2023 - act of the Prosecutor of Bankruptcy of the Cropias Magistrate Court was issued, which accepted our client's application for registration in the Electronic Solvency Register, under the provisions of Law 4738/2020 on small-scale bankruptcy.  

It should be noted that pursuant to Article 178 of Law 4738/2020 "If, according to the information accessible through the Electronic Solvency Register, it is likely that the unencumbered assets of the debtor's property are not sufficient to cover the costs of the proceedings and the debtor's annual income, in addition to the reasonable living expenses, does not exceed the reasonable living expenses referred to in par. 5 of Article 92, no receiver shall be appointed and the rapporteur shall order the entry of the name or surname of the debtor in the Electronic Solvency Register of Article 213 and the consequences of the entry in paragraph 5 of Article 92 shall apply. 4 of Article 77 [...]".

In the case at hand, our client had accumulated overdue debts of EUR 1,050,000.00 to both banking institutions, the State and the EFKA, for which payments were suspended. The aforementioned decision, therefore, accepted our client's claims regarding the absence of unencumbered assets available to cover the costs of the bankruptcy proceedings, as well as his zero income, and held that there was no case for the appointment of a receiver, but only the registration of the name of the applicant debtor in the Electronic Solvency Register, which it ordered, in order to bring about the consequences of the decision under Article 77 para. 4 of Law 4738/2020, including the subsequent discharge (i.e. after 36 months from the date of registration in the Electronic Solvency Register) of the debts that he cannot fulfil, in order to give him a second chance.

With regard to the issue of granting a "second chance" to debtors who are unable to repay their debts in good faith, it is also worth highlighting the reasoning of the decision of the Cropias Magistrate Court No. 42/2023, which preceded the aforementioned Order of the Judge of the Cropias Magistrate Court, by which the latter was appointed, according to which the new Law No. 4838/2020 is intended, as is evident from its title, to create a legislative mechanism which will provide a second chance to debtors who have been declared bankrupt after a certain period of time. "The above intention of the legislator is in harmony with the prevailing economic conditions of the country, but also with the basic purpose of the concept of bankruptcy, which is none other than the collective satisfaction of the creditors of the bankrupt through the process of liquidation of his assets. Moreover, as set out in the explanatory memorandum to the Law, the treatment of insolvency would be incomplete if it did not effectively incorporate the relief of bona fide debtors of natural persons from the burden of debts they are unable to service. One of the purposes of bankruptcy by modern law is to relieve the debtor of debts that he or she is unable to discharge so that he or she can be given a second chance. Giving debtors a second chance, in addition to the leniency of the legal system towards them, also serves the national economy, both because it facilitates the taking of business risks and because it allows indebted persons to have incentives to work and create wealth. When over-indebted individuals are unable to discharge their debts, they are driven into the underground economy to the detriment of society as a whole. "However, a 'new beginning' also exists in the case of non-entrepreneurs, in the sense of relieving them of the burden of their previous debts, which is of both vital importance for them and of wider economic significance, as it allows them to develop their productive and consumer behaviour without the same burden, which they will no longer have to pass on to each subsequent generation.

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