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In line with the government’s insolvency framework, households in need of loan restructuring will approach their creditors through Insolvency advisors. The establishment of the rules for the operation of the insolvency advisors is a priority for the Ministry of Finance, which has drafted The Insolvency of Natural Persons (Personal Repayment Schemes and the Debt Relief Ordinance) Law of 2015.

Mr. Sotiris Drakos is an approved insolvency counselor and our office offers insolvency and liquidation services.

Insolvency advisors are a new professional group that will try to help households in need of loan restructuring to develop effective plans and to persuade banks not to consider households as unsustainable and not to sell mortgages. The draft insolvency framework states that the rules governing the operation of the advisors will be rigorous as they will have access to household financials.

The role of the advisor
In particular, and based on the new insolvency framework, the advisor’s role will be focused on preparing a debt restructuring plan at the request of the debtor, who should act in good faith and make a full disclosure of his financial information to the insolvency counselor. A short standstill period will be required to protect the debtor from creditors’ actions, during which the insolvency advisor should present a restructuring plan, which may be binding if certain minimum criteria are met.

The insolvency advisor’s attempt is to propose a plan which would provide for the maintenance of the main residence if this is considered feasible and would not leave the creditors worse off than in the case of the debtor’s bankruptcy.

Companies and their rights
In the case of companies, any creditor or company will be able to apply to the court for the appointment of an examiner, i.e., a registered Insolvency Advisor. The Court will assess the company’s viability and if it considers that there are rescue options, it will approve the appointment by decision and the company will be protected by the Court for a period of four months during which no action can be filed against the company and the insolvency advisor should assess the company’s financial statements and submit to the Court a proposal for restructuring the company’s debt previously approved by the majority of creditors in value.

Where the Court approves the examiner’s proposal, this proposal will be legally binding on all parties involved. The Court will approve the restructuring proposal prepared by the examiner if it considers that the proposal is “sound and fair”, taking into account the continuation of business activity, rescue of jobs, as well as the fact that creditors should not be in a less favorable position than if the company was in liquidation.

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