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Guarantor’s proposals to troika

It is hoped that the troika of international lenders will approve the provisions in the fifth bill of the insolvency package so that it may go to the cabinet in early March for ratification and then to parliament.

Guarantor's proposals to troikaTHE government has made a number of bridging proposals to the troika of international lenders on the issue of guarantors to bad debt, which forms part of the fifth and final bill of the so-called insolvency package.

It is hoped the international creditors will green-light the provisions so that the bill can be brought before the cabinet for ratification in the first week of March, and then tabled to parliament, the Cyprus News Agency (CNA) reported.

Earlier, the lenders had red-flagged a proposal that guarantors of loans-turned-bad be let off the hook.

According to unnamed government sources cited by CNA, the finance ministry now proposes that guarantors are called to settle the principal debtor’s dues when the latter is unable to do so. However, it must be ensured that guarantors are left with reasonable living expenses allowing them to pay off their share of the outstanding debt.

The reasonable living expenses for guarantors must be 1.5 times the corresponding reasonable expenses set for the principal debtors.

A guarantor will have the right to pay in monthly instalments, if he or she so chooses, and the interest rate will not be higher than that charged to the principal debtor in the latter’s repayment scheme.

Also, the primary residence of a guarantor cannot be foreclosed on and auctioned off in order to pay off the principal debtor’s loan, unless the guarantor has put up his or her house as security for the debtor’s loan.

Under another bill regulating personal bankruptcy, the troika had agreed to spare from repossession individuals whose homes are worth up to €250,000 and the amount they borrowed up to €300,000.

But in addition to this, CNA reported, the troika people now want to add an additional eligibility criterion: the exemption will also take into account an individual’s total immovable assets. The eligibility value of the assets will be decided during further talks with the finance ministry technocrats.

Cyprus has agreed to overhaul personal and corporate bankruptcy laws, among other things, in exchange for a €10bn international bailout.

Readers' comments

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  • Augean Stables says:

    I foresee considerable challenges to the validity of guarantees. The circumstances around how they were procured, whether there was independent advice, how the original loan was procured oh and of course the Lender’s actions post guarantee in how they may have realised their security. I can see strong arguments on discharge of underlying loans. Another round of satellite litigation.

  • John Rose says:

    Reasonable Living Expenses, same as the GMI amounts I hope

  • @aj on 2015/02/20 at 11:44 pm – I’m sorry to hear what has happened, but I don’t think it was because you acted as a guarantor for someone else’s loan who then defaulted?

    It sounds as if you failed to maintain your home loan repayments and the Cypriot bank obtained a court judgement against you? If you failed to defend the court action the judgement would be uncontested enabling the bank to pursue you in the UK (or any other EU member state) via an EU Enforcement Order.

    It is vital that anyone receiving writs/termination notices defends the action in Cyprus – see Do not ignore Cypriot bank writs for loan non-payment otherwise they could end up in the same situation.

    The UK government has no powers to intervene in the matter.

  • Mike says:

    A good question Andrew, I would like to think that a guarantor is just that – a guarantor, so it matters not what their country of residence is. However there seems to be a lot of ifs and buts once again which possibly might make it seem all too easy to to avoid the obligation.

  • aj says:

    Andrew.
    of course they do.
    its amazing how they can make up all these new rules and policies but the main culprits ie the crooked Cyprus developers, lawyers and banks go untouched.
    you will find that a Cypriot not maintaining his loan will be treated way differently to a foreigner. A Cypriot having their home repossessed I don’t think so but a British person most definitely. First the debt collectors hassling you emails, phone calls, threatening letters, then being taken to court and having fines imposed on you.
    then the bailiffs knocking at your door and taking every wordly possession you have totalling say 15,000.
    but that’s not enough so yes its the house next.
    all this because I was conned by a crooked lawyer, developer, agent and bank all out to line their own pockets.
    for those of you who are not servicing your loan beware the big bad wolf will be knocking at your door sooner than you think.
    owe yer don’t rely on any help from your own government.

  • Andrew says:

    Do they propose to go after guarantors and business partners who live in other EU countries. The UK for instance?

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