In brief

  • A couple who had pledged their own property to guarantee a loan taken out by a company asked the Constitutional Court to strike down Law No. 77/2016 (debt-for-asset settlement law), arguing it unfairly excludes them from its benefits: the law only applies to loans taken directly by “consumer” individuals, not to guarantors of a legal entity.
  • The Court rejected the challenge as unfounded: there is no discrimination, because the debt-for-asset settlement mechanism was designed exclusively for the consumer-bank relationship, while guarantors of a company have another remedy, open to everyone: the hardship doctrine (“impreviziune”) in the Civil Code.
  • Nothing changes: personal or mortgage guarantors of a legal entity cannot extinguish the debt by handing over the property, but they can ask a court to adapt or terminate the contract if it has become excessively burdensome.
Act: CCR Decision No. 805/2025
Published: Official Gazette of Romania (Monitorul Oficial) No. 653 of 6 August 2026
In force from: 6 August 2026

The debt-for-asset settlement law became famous for letting many Romanians in financial trouble escape a bank debt by handing over their mortgaged home. But what about those who didn’t take out the loan themselves, but guaranteed it for someone else, a company? Decision No. 805 of 16 December 2025, published in Official Gazette of Romania No. 653 of 6 August 2026, answers exactly this question for a concrete case: a married couple had guaranteed, with their own property, a loan taken out by a legal entity.

The challenged provisions are Article 1(1)-(3) and Article 4(1)(a) of Law No. 77/2016, which make the law’s application conditional on a main legal relationship between a “consumer” individual and a credit institution. The claimants argued this condition discriminates against them: they too are individuals, guarantors with their own property, but cannot benefit from the debt-for-asset settlement mechanism simply because the main debtor is a company, not an individual.

The Court rejected the argument, citing its own earlier case law (Decision No. 373/2021) and Court of Justice of the European Union case law: the concept of “consumer” in Law No. 77/2016, taken from Government Ordinance No. 21/1992 and Law No. 193/2000, refers exclusively to individuals acting outside a commercial activity, and legal entities are entirely excluded from the debt-for-asset settlement law, whoever guaranteed their loan.

What it changes in practice

The law stays exactly as it was: the debt-for-asset settlement mechanism works only when the main debtor is an individual “consumer.” If a company took out the loan, neither the company nor its individual guarantors can extinguish the debt by handing over a property, regardless of who guaranteed it.

The Court showed, however, that a company’s guarantors are not left entirely without defence. Citing Decision No. 571/2017, the Court confirmed that any debtor or guarantor, regardless of Law No. 77/2016, can ask a court to apply the hardship doctrine, set out in Articles 969-970 of the old Civil Code or Article 1271 of the current Civil Code, if performing the contract has become excessively burdensome.

A court applying the hardship doctrine has three options: to keep the loan contract in its original form, to adapt it to new terms set by the court, or to order its termination. Unlike the debt-for-asset settlement mechanism, which is an almost automatic right for consumers meeting the law’s conditions, the hardship doctrine involves a trial in which the court examines each case and freely decides the outcome.

The Court also rejected the equality-of-rights challenge, showing that the text does not create an unjustified privilege: any debtor, including individual guarantors of a legal entity, has access to a hardship-based action, so they are not left without any legal remedy.

What has changed compared with the previous situation

Legally, nothing. The Court confirmed, with the same reasoning as in Decision No. 373/2021, that the scope of Law No. 77/2016 remains limited to consumer-credit institution relationships, regardless of who guarantees the loan.

What the decision adds is an explicit clarification of the specific situation of individual guarantors of a legal entity: for them, the only legal path remains the general-law hardship doctrine, not the debt-for-asset settlement mechanism, a distinction not previously settled precisely for this factual configuration (individual guarantor, legal-entity main debtor).

Advantages and disadvantages

What it improves

  • Definitively clarifies the scope of Law No. 77/2016, useful for all similar cases pending before the courts involving individual guarantors of indebted companies.
  • Confirms that a company’s guarantors are not left without a remedy: the hardship doctrine remains available, with a court able to adapt or terminate the contract, not just reject the claim.
  • Keeps the debt-for-asset settlement law consistent with the European definition of “consumer,” avoiding an extension that would have conflicted with EU law.
  • Provides a clear precedent for lawyers and courts, reducing legal uncertainty in similar cases.

What remains a problem

  • Individual guarantors of a company remain, in practice, in a weaker position than consumers: they do not have an almost automatic right, but must win a hardship-based case with an uncertain outcome.
  • The hardship doctrine requires proving an “excessively burdensome” imbalance, a higher threshold and a more procedurally costly one than simply meeting the conditions in Law No. 77/2016.
  • The situation can particularly affect people who guaranteed, in good faith, the loan of a small company or a family business, without anticipating the risk of losing their own home.
  • The decision offers no alternative legislative solution; extending the debt-for-asset settlement mechanism to guarantors of legal entities depends solely on a possible future initiative by Parliament.

Practical advice

  1. If you guaranteed a company’s loan (your own or someone else’s) with a property, do not rely on Law No. 77/2016 to extinguish the debt through the debt-for-asset settlement mechanism; check from the start whether your situation strictly meets the law’s definition of “consumer.”
  2. If repaying the guaranteed loan has become excessively burdensome, discuss with a lawyer an action based on the hardship doctrine under the Civil Code, a path that remains open regardless of consumer status.
  3. Before personally guaranteeing a company’s loan, find out explicitly about the difference in legal protection compared with a loan taken out directly as an individual for personal needs.
  4. If you are already in a similar dispute, check with your lawyer whether the claim should be reframed on hardship grounds rather than the debt-for-asset settlement mechanism, in light of this decision.

Frequently asked questions

What did those who raised the constitutional challenge ask for?
That Law No. 77/2016 be declared unconstitutional because it excludes individual guarantors (personal or mortgage) of a legal entity that took out a loan from the debt-for-asset settlement mechanism, even though they themselves are individuals.
Why did the Constitutional Court reject the request?
Because Law No. 77/2016 applies exclusively to relationships between an individual “consumer” and a credit institution; if the main debtor is a legal entity, neither the company nor its guarantors fall under the law, regardless of the guarantor’s status as an individual.
Are a company’s guarantors left with no legal protection at all?
No. The Court confirmed they can ask a court to apply the Civil Code’s hardship doctrine, which allows the loan contract to be kept, adapted or terminated if performing it has become excessively burdensome.
What is the difference between the debt-for-asset settlement mechanism and the hardship doctrine?
The debt-for-asset settlement mechanism is an almost automatic consumer right if the law’s conditions are met: it extinguishes the debt by handing over the property. The hardship doctrine involves a court trial that examines each case and can decide to keep, adapt or terminate the contract, with no guaranteed outcome.
Does anything change for individual consumers who took out the loan themselves?
No. The decision concerns only the situation of a legal entity’s guarantors; consumers who contracted the loan directly remain protected by Law No. 77/2016, unchanged by this decision.

Original text of the legal act

The full text, as published in the Official Gazette of Romania

Official Gazette of Romania no. 653 of 6 August 2026 8 pages PDF, 81 KB the act starts on page 3

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This article is for informational purposes only and does not constitute legal advice. For specific situations, consult a licensed attorney or tax advisor.