E. Karanikola - Application For Income Exemption From The Bankruptcy Estate And One-Year Discharge

Summary:In previous articles, we discussed the procedure for declaring simplified bankruptcy as well as the debtor's remaining assets following the declaration (see here). In this article, we examine the special provision of Article 92(3) of Law 4738/2020 (Bankruptcy Code) concerning the complete exemption of part of the bankrupt debtor's annual income from the bankruptcy estate. This also triggers Article 192(2) of the Code, which allows for discharge from debts within one (1) year of the bankruptcy declaration.

1. Legislative Provision

One of the key consequences of a bankruptcy declaration is the division of the debtor's estate into pre-bankruptcy and post-bankruptcy assets, in service of the bankruptcy process. According to Article 93(1) of the Code, the debtor no longer has the right to manage or dispose of their estate, as these powers are transferred to the trustee. The bankruptcy estate includes all assets owned by the debtor at the time of the declaration, while any assets acquired thereafter fall under the post-bankruptcy estate and remain under the debtor's control (see more here).

As an exception to this separation, Article 92(2) of the Code imposes a conditional obligation on the debtor to contribute part of their annual income to the bankruptcy estate until discharge. Specifically, the contribution is calculated based on income exceeding either the annual reasonable living expenses or twelve times the unseizable amount under Article 33(2) of the Code for the Collection of Public Revenues, whichever is higher. However, Article 92(3) reinstates the exemption rule for income, under specific conditions detailed below.

2. Eligibility Criteria and Legal Consequences

To qualify for the exemption under Article 92(3), the debtor must cumulatively meet the following criteria:

• The debtor's fixed assets (e.g., primary residence or other immovable property) must exceed €100,000 in value, as defined in Article 11 of Law 4738/2020.
• The debtor's estate must be worth more than 10% of their total liabilities, calculated based on the bankruptcy stage, particularly the status of claim verification. If the three-month window for filing claims has not elapsed, liabilities are determined from documents submitted with the bankruptcy petition (see Article 79(6) of the Code).
• Assets acquired within twelve months prior to the bankruptcy application are excluded from the estate valuation.

If these criteria are met, the debtor's annual income—regardless of amount—is excluded from the bankruptcy estate up to five times the reasonable living expenses. For reference, according to ELSTAT statistics, reasonable living expenses for an adult amount to €6,448 annually, with the exemption capped at €32,240.

The rationale of this provision, as explained in the explanatory memorandum of the Code, is to avoid excessive burden on debtors who have already contributed a substantial portion of their assets to the bankruptcy process (see, for example, ruling no. 6/2023 of the Ilion Magistrate's Court).

To benefit from this provision, the debtor must submit a request to the Bankruptcy Court or include it in the initial bankruptcy petition. A court decision must then confirm that the above conditions are met and exclude the relevant income from the bankruptcy estate.

An important advantage of the exemption under Article 92(3) is the subsequent application of Article 192(2): the debtor is discharged from all eligible debts—whether submitted or not—36 months after the declaration, unless an objection is filed within this period. Notably, objections may be raised during the income exemption hearing.

However, for debtors meeting the conditions of Article 92(3), the discharge period is reduced to one (1) year. Law 5222/2025, Article 245 clarified that for the one-year discharge to apply, a court must issue a decision confirming the income exemption. Thus, the court decision is a necessary condition for this benefit (see ruling no. 93/2024 of the Athens Magistrate's Court).

It is also noteworthy that ruling no. 564/2025 of the Athens Court of First Instance held that even debtors with no income but who meet the asset-based criteria may qualify for the one-year discharge. In this case, the debtor had no income, debts totaling €1,380,048, and assets worth €268,816.35 (acquired before the 12-month exclusion window), satisfying both the €100,000 and 10% asset-to-debt thresholds.

3. Conclusion

The relevant provisions of the Bankruptcy Code offer a more favorable framework for a specific category of debtors by allowing, under strict conditions, exemption from the obligation to contribute part of their income to the bankruptcy estate. This reflects a legislative intent to provide relief to those who have already submitted a substantial portion of their assets. The most significant benefit is the reduced discharge period of one year, granted via judicial recognition of eligibility under Article 92(3).

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.