What is the Second Chance Law?
The Second Chance Law was approved in Spain in 2015, with the aim of helping individuals (individuals or self-employed) who are in situations of insolvency to reorganize their debts and recover financially, through total or partial cancellation of debt, and/or renegotiation.
Through the Second Chance Law, individuals who have experienced economic bankruptcy, are indebted, and whose debtor situation is unviable, can clean their name and start over. This law allows debtors to benefit from certain cancellations, as well as to ask for a second chance from their creditors, which will allow them to redirect their debts and get out of the insolvency situation.
Can I take advantage of the Second Chance Law?
The Second Chance Law applies to all debtors (individuals) who meet the established requirements. To be eligible for the law, the debtor must have a total debt of at least 10,000 euros and must not have had any type of insolvency in the last five years. Additionally, the debtor must demonstrate that their insolvency situation is the result of extraordinary circumstances, such as a serious illness, loss of employment, or poor financial management.
Not all cases are suitable for this law. Among other reasons, an interested party CANNOT take advantage, for example, if:
- the current economic situation has been deliberately caused by the interested party
- has previously availed of this same law in the last 10 years
- has recently rejected job offers that could have prevented bankruptcy
Once the debtor is eligible for the law, they can file an application to reorganize their outstanding debts. This application will be evaluated by a judge, who will decide if the debtor is able to satisfactorily reorganize their debts. If approved, the debtor can then negotiate with their creditors to establish a new payment structure that can be met.
Creditors must accept the terms of the law and grant the debtor a debt reduction, a modification of the debt terms, or an extension of deadlines.
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What debts can be canceled?
Through the BEPI, Benefit of Exoneration of Unsatisfied Passive, you can partially or totally cancel debts with public entities such as municipalities, Tax Agency or Social Security, and also with private entities such as banks or suppliers.
It is important to note that the debtor will have to face and pay the outstanding debt with a payment plan within a reasonable time frame, at which point they would have a clean credit history again, thus being able to reapply for financing and/or credit cards and be removed from default lists.
It is also worth clarifying that debts are not canceled definitively, but this cancellation can be revoked during the following 5 years in case the debtor experiences extraordinary enrichment, or creditors can prove that good faith has not been acted upon.
In summary, the Second Chance Law is an excellent way to help individuals reorganize their debts and get out of the insolvency situation. If you are going through a difficult situation and need a second chance to reorganize your debts, it may be the solution you are looking for.
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Contact us today and find out about the steps to start a new path.
We have a team of lawyers and consultants specializing in the Second Chance Law who will help you solve all your doubts, and draw up, from today if you wish, the roadmap towards your new financial reality.
Visit us at our headquarters at Avenida del Mediterráneo, 10, in Madrid. Meetings via video conference are also possible, and of course, by phone contact.
