By Federico Blanco, Lawyer and Doctor of Law

WHAT ARE THE DEBTS THAT CAN BE THE SUBJECT OF EXONERATION?

The Second Chance Law is aimed at both individuals (consumers) and the self-employed, requiring the following REQUIREMENTS:

1) Not having assets (if you have it, it must be liquidated within the bankruptcy procedure). However, on certain occasions, it will be possible to keep your habitual residence.

2) Be what the Law calls a “debtor in good faith”. To do this, it is necessary:

a) That the bankrupt is not declared guilty, that is, that the cause of the insolvency is not manifest negligence or will to commit fraud on the part of the bankrupt.

b) Not having taken advantage of the Second Chance Law in the previous 10 years.

c) Not having been convicted of crimes against property, against the socioeconomic order, forgery of documents, against the Public Treasury and Social Security or against workers' rights.

d) Not having rejected a job offer “adequate to your ability.”

WHAT ARE THE DEBTS THAT CAN BE THE SUBJECT OF EXONERATION?

Through the second chance mechanism, all debts of the bankrupt may be completely eliminated, with the exception of:

- Public law debts (owed, for example, to the TGSS or the AEAT).

- Debts derived from alimony pensions.

- Certain labor debts (if the bankrupt had employees).

- Debts that are generated with the declaration of bankruptcy itself (such as, for example, the fees of the Bankruptcy Administration).

However, the Law provides for the possibility that said non-exempt debts, including public and labor debts, can be satisfied through a payment plan that lasts 5 years.

Furthermore, even if said payment plan had not been fulfilled in its entirety, if the debtor had allocated at least half of his income to its fulfillment (as long as it was not seizable), all his debts may be completely exonerated after those 5 years. , including labor debts and even public debts, as interpreted by the Supreme Court.

WHAT ARE THE STEPS TO FOLLOW TO GET THE SECOND CHANCE?

The first thing you should do is contact an office specialized in the matter, which can gather all the information necessary to prepare the bankruptcy file.

After that, it will be advisable to try to reach an “extrajudicial payment agreement with creditors”. If said agreement is not achieved, the corresponding request for voluntary bankruptcy must be submitted. In said bankruptcy procedure, a Bankruptcy Administrator will be appointed, who will be in charge of ensuring the interests of the creditors, liquidating the assets (if any) and supervising payments and income during the entire time that the procedure lasts.

Finally, it will be necessary to present a formal request for exoneration of the unsatisfied liabilities before the bankruptcy judge who, if it meets all the requirements described above, will achieve the total and definitive elimination of the debts of the bankrupt.

Alternatively, if the requirements to obtain the initial BEPI cannot be met, a “payment plan” must be presented in which, for 5 years, the debtor commits half of his or her non-attachable income (for example, for a person with income of 3,000 euros per month and dependent children, the amount to be committed would be less than €400 per month).

After this period, the debts still outstanding will be completely exonerated.

HOW LONG CAN THE ENTIRE PROCESS LAST?

A process of these characteristics usually lasts approximately one year, although this period could be longer depending on the specific characteristics of each case.

WHAT COST DOES THIS PROCESS HAVE?

It depends on many factors, such as the amount and nature of the debts, the applicant's assets and income, family responsibilities and the possible existence of a habitual residence owned with an outstanding mortgage. But, in any case, the total cost is always a tiny portion of the debt that can be exonerated.