Greece’s Independent Authority for Public Revenue (AADE) has issued a new directive clarifying the conditions and process for the cancellation of debts owed by over-indebted individuals. These debts fall under the provisions of a 2010 law aimed at protecting heavily indebted households. The circular outlines how and when such debts can be forgiven, particularly in light of judicial decisions and bankruptcy proceedings.
The key message is that debt relief is not automatic, even if a Greek court has ruled that a debtor qualifies for protection under the law. For the cancellation of debts to take effect, the entire repayment period set by the court must first be completed. This remains true even in cases where the court has set zero monthly payments, due to the debtor's lack of income. What matters is that the debtor adheres fully to the court's terms throughout the designated period. Only upon the successful completion of this phase is the individual considered fully discharged from remaining debts. This stipulation allows the courts the flexibility to adjust the terms if the debtor's financial circumstances improve during the repayment period.
The directive also addresses the issue of third-party garnishments — for example, funds seized from a debtor’s bank account. Such measures are not automatically lifted, even after a court decision. If the garnishment relates to debts that fall under Article 9 of the over-indebtedness law, the seized funds will continue to be paid to the state until the full amount stipulated by the court ruling is covered. Only once that total is paid, and the discharge is legally recognized, can the garnishment be lifted.
Importantly, the process of debt cancellation does not require the debtor to file any formal application. The competent tax authority initiates the process on its own, provided all legal conditions for discharge are met and the relevant debts have been properly identified. The two-year period during which a discharge may be revoked, for example if hidden assets are discovered, begins not with the publication of the court decision but with the debtor’s actual compliance with court-imposed obligations.
The circular also distinguishes between debt relief under the over-indebtedness law and relief through bankruptcy proceedings under Greece’s former Bankruptcy Code, enacted in 2007. In bankruptcy cases, the court may also grant discharge, but only for debts incurred up to the date of bankruptcy. New debts incurred after that point — for example, tax liabilities arising in the years following bankruptcy — remain collectible. Furthermore, debts arising from fraud or gross negligence are not subject to discharge, and the authorities retain the right to enforce collections if undisclosed assets come to light.
Where debts have previously been deemed uncollectible, fulfilling the conditions for discharge leads to the removal of any restrictions linked to those debts. This includes, for instance, the lifting of account freezes and the ability to obtain tax clearance certificates.
The circular also provides real-world implications. If a court determines that a debtor with no income does not need to make any payments, this does not mean the debt is immediately wiped out. The court-defined repayment period — say, three years — must still pass, and if the person’s financial situation improves during that time, the terms may be revised. Likewise, if the tax authorities had seized funds before the debtor entered the debt relief process, those amounts are not returned. Instead, they are counted toward whatever repayment the court has ultimately required. For example, if €3,000 had been seized and the court orders a total repayment of €6,000, the seized amount is treated as a partial payment toward that obligation.
