The 2015 Law on Insolvency Practitioners and all relevant rules in their wholeness are the ones that regulate the professional framework in which an Insolvency Practitioner (IP) operates in Cyprus. Regulating the profession was therefore determined as necessary, in order to ensure the effective implementation of the insolvency processes and procedures which are stated in and promoted by the Law.
Responsibility and Action taken by an Insolvency Practitioner
According to the Law, only a licensed Insolvency Practitioner can act on behalf of:
A legal entity (company):
- The Liquidator
- The Receiver & Manager
- The Examiner
A natural person:
- Bankruptcy Receiver
- Temporary Property Receiver
- Loan Repayment Consultant
We shall note there that, under all circumstances of appointment of an Insolvency Practitioner, specific fees are incurred, which are determined by the Law and should be shared as common knowledge in advance to all parties affected. In addition, all requirements and conditions which bind each specific case of appointment should be examined in advance, so that a correct evaluation takes place as to the whether the appointment of the IP will result in a successful outcome.
With regards to all matters mentioned above, as well as all the other cases for the appointment of an Insolvency Practitioner, such in Liquidation and/or Receivership cases for a Legal Entity or Property piece/s following bankruptcy and/or in cases of Natural Persons, at Revita we constitute a team of experienced, licensed Insolvency Practitioners always at your disposal for further discussion, explanations and clarifications to your very own possible enquiries.
We will now focus on the actions aiming towards the admission of an insolvent entity in a Personal Repayment Plan (PSA in Greek),
which focuses on protecting the primary home of a household.
Personal Repayment Plan (PSA)
The duties and responsibilities of an Insolvency Practitioner are determined by Insolvency of Natural Persons (Personal Repayment Plans and Debt Relief Order) Law of 2015 (L. 65(I)/2015).
The aim of this Law is to regulate two new mechanisms with
regards to the credit obligations of natural persons, as follows:
1. Personal Repayment Plans, through which, under specific conditions, the restructuring of the debt of the natural person will be achieved, so that repayment of creditors is ensured and, whenever possible, the primary home is rescued.
2. Debt Relied Order, where via relevant court rules, debtors without available income or significant asset ownership to be utilised in the loan repayment process, can be relieved of any unsecured debt obligations amounting up to €25.000.
It is important to focus on Personal Loan Repayment plans, where the main efforts of an Insolvency Practitioner, after receiving all relevant information regarding the financial starus of a debtor, circulate around the preparation of a debt restructuring plan, so that the credit burden is classified as sustainable and the debtor as solvent.
The debtor must be insolvent, which means that they must be unable to execute any repayments of their debt as these have been presented, they must act in good faith and disclose all relevant financial information to the Insolvency Practitioner. Under certain conditions, an obligatory period of protection from potential action taken by creditors of a duration of 95 days is imposed by the Court of Justice. During this period, the Insolvency Practitioner will have to present a restructuring plan for the debt obligations of the relevant debtor, which will protect their primary home, in any case this is possible. The Plan is then passed on to relevant creditors for voting for its approval. In certain cases where the creditors do not approve of the plan, the Court of Justice has the ability to force it, if specific criteria, as outlined by the Law, are satisfied. Some of these conditions and criteria are as follows:
- The valuation of primary home not to exceed the amount of €350.000.
- The total value of the assets of the debtor, excluding the primary home, not to exceed the amount of €500.000.
- Reduction in earnings by at least 25% or more from 2009 onwards.
Under specific conditions, there exists a possibility for the Restructuring Plan to promote the write-off of unsecured debts, as well as the full exemption of the debtor’s guarantors, wherever the value of the mortgaged securities exceeds the total value of total debt.
