Greece halts municipal seizures under out-of-court debt mechanism — Even if enforcement has already begun

Greece has introduced significant new protections for debtors owing money to municipalities, as the Governor of the Independent Authority for Public Revenue (AADE) activated Article 35 of Law 5270/2026, effectively suspending asset seizures for municipal debts — even in cases where enforcement measures have already begun.

The move expands Greece’s out-of-court debt settlement mechanism (Exodikastikos Michanismos) to include debts owed to municipalities and their legal entities — obligations that were previously excluded if enforcement actions such as bank account seizures had already been initiated.

New Protection for Citizens and Businesses

The reform opens a new legal pathway for thousands of citizens and businesses with accumulated municipal debts, including:

• Municipal cleaning and lighting fees
• Administrative fines
• Rent for municipal properties
• Other local government charges

Until now, such debts were often subject to aggressive collection measures, including bank account freezes, wage garnishments, and property seizures.

Under the new framework:

The existence of ongoing enforcement measures does not prevent submission of an application to the out-of-court mechanism.

Once an application is definitively submitted, forced collection measures are suspended.

If a restructuring agreement is successfully concluded and respected, previously imposed seizures are lifted.

Who Qualifies?

The out-of-court mechanism applies to debts exceeding €10,000.

These debts are typically already targeted by municipal financial services and frequently subject to compulsory enforcement procedures.

With the AADE Governor’s circular (No. 3003 EX 29-01-2026), tax and municipal authorities have now been formally instructed to suspend seizures in such cases.

What Changes Legally?

Although the relevant provisions (Articles 35 and 46 of Law 5270/2026) entered into force upon publication in the Government Gazette on January 23, 2026 (FEK A’ 9/23-1-2026), practical implementation required administrative guidance — now provided by AADE Governor George Pitsilis.

Key clarifications include:

Enforcement or precautionary measures imposed by municipalities do not block an application to the out-of-court settlement mechanism.

Article 18 of Law 4738/2020 — concerning suspension of enforcement actions — now explicitly applies to municipalities and their legal entities.

Upon signing a debt restructuring agreement, all previously imposed enforcement and safeguard measures are lifted.

If the restructuring agreement is overturned or canceled, municipalities may immediately resume forced collection measures.

Municipalities retain exclusive authority to manage enforcement measures related to debts falling within the mechanism’s scope.

Implications for the Greek Economy

The expansion of the out-of-court mechanism to municipal debts represents a major shift in Greece’s debt management framework, strengthening protections for small businesses and households under financial pressure.

At a time when liquidity challenges persist for many enterprises, particularly SMEs, the reform is expected to ease immediate financial strain and reduce the risk of business closures triggered by municipal enforcement actions.

However, compliance with the restructuring agreement remains essential. Failure to adhere to the terms restores the municipality’s right to enforce immediate collection.