What is the second chance law?

In 2015, the Second Chance Law was approved in Spain, the objective of which is to exonerate debts , lighten the financial burden and other social measures for people in serious financial distress. It is regulated by Law 25/2015, of July 28 ,.

The name of this regulation, Second Chance Law, is not random. It is intended to imply that any individual or small businessperson can start over from scratch if their financial situation is unsustainable .

The Law allows renegotiation of the way in which the debts will be returned so that the affected person can meet their living expenses. In the event that an agreement is not reached, a judge could cancel it or exonerate the debtor from it.

Who can join?

The Second Chance Law is designed for individuals, families and self-employed professionals. The total estimate of the debts cannot exceed five million euros (5,000,000 euros). Previously, only legal persons or companies could benefit from the privilege of requesting the exoneration or forgiveness of their debts. This Law already allows individuals, families or the self-employed who cannot meet their financial obligations, to benefit from the partial or even total forgiveness of their debts in order to start from scratch, without charges.

What do I have to do to benefit from the Second Chance Law?

It is necessary to hire a lawyer specialized in Commercial and Financial Law to correctly carry out all the procedures. All the steps must be carried out correctly and thoroughly to obtain the benefits that the Law provides, such as exemption.

Phases of the Second Chance Law

1) Extrajudicial Payment Agreement (AEP)

• First, an out-of-court payment agreement must be attempted.

• An out-of-court mediation system is initiated, usually through the appointment of a bankruptcy mediator.

• The negotiations of this out-of-court payment agreement will have a maximum duration of three months (two in the case of a non-entrepreneur natural person).

• During the negotiation process, creditors may not initiate or continue judicial enforcement proceedings .

• For the out-of-court payment agreement to be considered approved, and to bind all creditors (except mortgages), a favorable vote will be required between 60% and 75% of the liability. (75% If the proposal includes waits of more than five years and you remove more than 25% .60% If you remove them and wait they are lower than those mentioned).

2) Second phase. Consecutive competition and obtaining the Benefit of Exoneration of the Unsatisfied Liability (BEPI).

Once the out-of-court payment agreement has been unsuccessfully terminated, a "consecutive contest" will begin. It will begin before the Judge of the debtor's domicile, whose purpose will be the orderly liquidation of the debtor's assets.

After completing the liquidation of the debtor's assets, if any, the debtor must request the Benefit of Exoneration of the Unsatisfied Liability or BEPI.

In case of not having assets, the request will be made once the judge issues the corresponding declaration of the contest. In addition, the simultaneous conclusion will be necessary due to insufficient active mass.

Requirements to enjoy debt relief.

1. Agree to submit to a payment plan regarding unfulfilled debts. This plan will be approved by the Judge and will have a maximum duration of five years, without interest.

2. Comply with the duty of collaboration with the bankruptcy judge and with the bankruptcy administration.

3. Not having obtained this benefit within the last ten years.

4. That he has not rejected a suitable job offer within the four years prior to the declaration of insolvency.

5. That it be expressly stated in the request for exoneration of the unsatisfied liability that the obtaining of this benefit shall be recorded in the special section of the Public Bankruptcy Registry. This registry must have the possibility of public access for a period of five years.