Much has been written about the new Out-of-Court Debt Settlement Mechanism introduced by Law 4738/2020. On its procedure, eligible debts, the individuals who can apply, and so on. One key issue that concerns both citizens and businesses is whether joining the mechanism offers protection against enforcement actions (such as auctions) by creditors, and under what conditions. From the moment you submit your application to the moment you sign the restructuring agreement with your creditors, what protection does the platform offer?
The law governing the new out-of-court mechanism (Article 18) provides that debtors are automatically protected from enforcement actions, but with three critical exceptions:
a) Protection is not granted from the moment the application is submitted, but from the moment it is finalized. Therefore, preparation is required, and simply submitting the application (which takes just seconds) is not sufficient.
b) Protection does not cover pre-auction procedures initiated by a secured creditor (e.g., a bank holding a lien on the debtor's property), such as seizures or continuation notices. It only covers the actual auction act.
c) Protection does not apply to auctions scheduled within three months from the date of submission.
Even if a debtor is not covered under the law's automatic protection provisions, they may still appeal to the courts to request special protection. This applies regardless of whether the creditors eventually agree to the algorithm's proposal.
In summary, there are four stages of debtor protection under the out-of-court mechanism:
A. The first stage is from the submission of the application until its finalization. Submission initiates the process (a matter of seconds), while finalization involves collecting all necessary data from the system (a matter of weeks). During this stage, if the application has not yet been finalized, a creditor may proceed with actions such as property seizure. In such cases, courts have granted protection to debtors due to the creditor's abusive conduct, especially when (a) enforcement began after the application submission, making it hard to claim the application was abusive, and (b) the delay in finalization is due to the creditors. See, for instance, Decision No. 10589/2024 of the Thessaloniki Single-Member Court of First Instance: "The imposition of the seizure was, based on the above facts, sudden and intended to preempt the review of the possibility of debt settlement under the said law, for which the opposing party was obliged to justify its non-consent, while it is also shown that the opposing party aimed to impose the seizure before the final submission of the application so that Article 18(1) would not apply."
B. The second stage is after the finalization of the application, when the automatic protection under the law applies. For example, Decision No. 211/2025 of the Lamia Single-Member Court of First Instance states: "Regarding the first appellant, it was proven that with Certificate No. ......../11-10-2024 from the General Secretariat for the Financial Sector and Private Debt Management, he submitted a personal application with protocol number ....... and final submission date 11-10-2024, seeking to settle his debt under the Out-of-Court Debt Settlement Mechanism, pursuant to Law 4738/2020. Nevertheless, on 31-10-2024, only twenty days later and while the application was still being evaluated by creditors, the opposing party initiated enforcement proceedings without waiting for the evaluation to be completed, opting for the harshest method to collect the debt."
C. The third stage is after the two-month period following finalization has passed, but the procedure has not yet concluded for reasons not attributable to the debtor. According to the law, the process is considered terminated if no restructuring agreement is signed within two months. Some court decisions deny protection in such cases, while others suspend or annul enforcement actions. For example, Decision No. 762/2024 of the Athens Court of First Instance annulled a seizure imposed in September 2023, even though the debtor had finalized their application in March 2023. The court found that "the opposing party acted unlawfully and abusively in exercising its legal rights, exceeding the limits of good faith and fair dealing... choosing the harshest method, causing the debtor irreparable harm."
D. The fourth and final stage is when either a restructuring agreement is signed or the creditors reject the proposal. In the first case, enforcement actions cease as the debt is restructured. In the second case, the debtor may still obtain protection by proving that the creditors' rejection of the algorithm's proposal was abusive. See Decision No. 367/2024 of the Patras Single-Member Court of First Instance, which found a Servicer's behavior abusive due to persistent obstruction of the debtors' inclusion in the mechanism, including repetitive internal requests and eventual rejection of the proposal, followed by issuing a second payment order and proceeding with enforcement.
Therefore, the out-of-court platform provides limited automatic protection against auctions. To fully utilize this legislative tool, judicial intervention — initiated by the debtor — is often necessary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
