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Insolvency Service to file first applications for debt relief on Monday

By Stelios Orphanides

The Insolvency Service will on Monday start filing the first applications for debt relief at the courts for cases concerning amounts of up to €25,000.

“The Insolvency Service has received 644 applications from August 2015 when the enactment of the new insolvency regime was put into effect,” Giorgos Karotsakis, the head of the unit, said on Friday in a telephone interview. “Next week we will submit a total of 30 applications for debt relief”.

Debt relief was made possible after parliament passed updated insolvency laws together with legislation on foreclosures a year ago, in line with Cyprus’s bailout terms.

The head of the Insolvency Service added that the number of people who will benefit from the applications is larger as they will put “an end to the transferring of debt to the guarantors”.

Karotsakis said that the average amount of applications for debt relief is between €18,000 and €20,000 per applicant and concern debt to all banks “but mainly” Cyprus’s three major lenders: Bank of Cyprus, Cooperative Central Bank and Hellenic. The beneficiaries from debt write-offs could also get a discount on money owed to the government, he said.

On Monday, the Insolvency Service will also file two applications for the 95-days protection order in favour of persons eligible to benefit from personal insolvency arrangements, Karotsakis said. During that period, in which an insolvency advisor can produce a personal debt repayment scheme, creditors can take no action against the debtor or guarantors.

Creditors can either accept or reject the proposed scheme and if they fail to reach a consensual arrangement with the debtor, the latter has the right to file an application to the court, directly or indirectly through the Insolvency Service, to “request an order” that will impose on the creditor a debt repayment scheme, Karotsakis said.

To be eligible to apply to the court, a debtor needs to have debts below €350,000, “his primary resident should be collateralised on the debt with a maximum market value of €300,000, and provided (the value of) his other properties does not exceed €250,000,” he said.

Karotsakis added that the Insolvency Service has discharged 8,500 persons from bankruptcy, “giving them a second chance to be reinstated in the economy” discharging them also of all their unsecured debt.

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