Amendments Introduced By Law 112(I)/2026 In The Framework Of Personal Insolvency

The Official Gazette of the Republic of Cyprus published Law 112(I)/2026 on 8 May 2026, amending the Personal Insolvency Laws of 2015 to 2020. The amendments affect the two main insolvency mechanisms, namely Debt Relief Orders and Personal Repayment Plans.

Initially, by amending the preamble of the law, the reference stating that creditors should not be placed in a worse position than they would have been should the debtor’s assets had been distributed in accordance with the provisions of the Bankruptcy Law, was deleted.

This change does not constitute a mere technical legislative adjustment, but it reflects the legislator's intention to strengthen insolvency mechanisms as tools for addressing debts.

A. Debt Relief Orders (“DROs”)

The most significant amendments to Debt Relief Orders concern the broadening of the eligibility criteria, the definition of “debt”, the valuation of assets and the inclusion of claims based on unfair contractual terms.

Specifically, the percentage relating to the definition of "eligible debt" in Articles 10 and 16 is increased from 10% to 30%. Furthermore, the definition of "debt" is amended, as Article 10 now provides that "debt" in relation to a debtor means (a) debt for a liquidated amount which, as at the date of application, has become payable, or (b) debt which, as at the date of application, is in arrears exceeding 120 days. Additionally, Article 11 is amended by the addition of a proviso whereby, for confirmation of the value of an asset, sufficient evidence, in the opinion of the Insolvency Department, is submitted, and for the determination of the market value of immovable property, evidence from a valuer, as the terms "valuer" and "market value" are defined in Article 44. A further provision is introduced so that claims based on unfair contractual terms are also included among the claims, as such terms are defined under the Consumer Protection Law.

B. Personal Repayment Plans (“PRPs”)

Articles 46 and 74 have been amended to expressly exclude from disposal assets that are necessary for the debtor's subsistence or work.

As regards the content of the Insolvency Practitioner’s report, Article 52 is amended so that the report is limited solely to whether, in the Practitioner's opinion, the debtor can reasonably comply with the terms of the proposal. Simultaneously, the obligation for the report to assess whether the PRP places creditors in the same or a better position than that in which they would have been if the debtor’s assets had been distributed in accordance with the provisions of the Bankruptcy Law is removed.

Law 112(I)/2026 also introduces changes to the procedure for creditors' decision-making at the creditors' meeting. Specifically, through the addition of new subsection (5A) to Article 53, a creditor who does not have voting rights, as well as any amount owed to such creditor, are not taken into account either for the counting of votes or for the calculation of the required majority. Furthermore, new subsection (5B) of Article 53 provides that a designated creditor who disagrees with the PRP must submit reasoned grounds for such disagreement; otherwise, the creditor is excluded from the right to object, appeal for annulment, or apply for the setting aside of a protective order.

As regards valuation, Article 55 is amended by replacing the reference to "market value" with "forced sale value" as the basic measure of the value of the relevant security. This change has substantial practical significance, as forced sale value is ordinarily lower than market value.

With regard to guarantors, Article 67 is amended so that, notwithstanding the provisions of any other law, no action or other legal proceedings relating to a guarantee may be commenced or continued by a creditor against a guarantor from the date on which the PRP comes into force and for as long as it remains in force.

Furthermore, through the amendments, the eligibility criteria for non-consensual PRP are reformed. First, the principal residence value threshold is increased from €350,000 to €400,000, expanding the category of debtors who may benefit from this protective framework. Second, specific restrictions relating to reduction of the debtor's income are abolished. Concurrently, a presumption is introduced that any reduction in the debtor's income is due to circumstances beyond the debtor's control, unless the creditor proves otherwise.

Finally, Article 73 is amended by deleting requirements concerning the comparison of the position of creditors with the bankruptcy process for the purposes of judicial imposition of the PRP.

Commencement

The provisions of Law 112(I)/2026 came into force upon its publication in the Official Gazette on 8 May 2026 and apply exclusively to applications filed or proceedings commenced after that date. Accordingly, pending applications submitted before 8 May 2026 continue to be governed by the previous legislative framework.

Conclusion

Law 112(I)/2026 constitutes a significant reform of Cypriot personal insolvency law following the enactment of the principal law in 2015.

The amendments substantially reshape the operation of the DRO and PRP mechanisms. The broadening of eligibility criteria, the simplification of evidential requirements, the strengthening of protection for debtors and guarantors, and the removal of restrictive comparative criteria together create a more flexible personal insolvency framework.

The practical significance of the changes is particularly important. Cases which under the previous regime were considered non-viable or ineligible may now be capable of assessment under more favourable terms.

Accordingly, both debtors and creditors should take into account the new legislative framework when planning their strategy, as the amendments substantially affect the rights, obligations, and available options of all parties involved.