THE 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.