A pensioner in Motril, Costa de Granada, has managed to get a court to exonerate him from 100% of a debt of 45,000 euros that he acquired by applying for up to 25 microcredits from different companies. This is because the pensioner took advantage of the Second Chance Law, a legal mechanism approved in 2015 that allows individuals and self-employed debtors to renegotiate their debts or get rid of part of them. The procedure is designed to help people who are in a difficult financial situation due to serious insolvency or bankruptcy. In addition to exempting him from the debt, the seizure of his vehicle was also avoided.
After receiving a decrease in his monthly income, the pensioner, who received a disability payment, began to have difficulties to face his debts. To avoid defaults, he decided to apply for microcredits. What at first was a strategy to put out fires soon became a more serious problem due to the interest on these loans, which also had higher interest rates. Fearing the seizure of his income, he sought a solution to his problem, contacting an association that told him about the Second Chance Law.
The resident of Motril met all the necessary conditions to benefit from the Second Chance Law: total insolvency, the result of the change in income, and the impossibility of paying the debt despite his good faith, for which his lawyers proceeded with the relevant procedures. .
Once the Second Chance Law was applied for, the pensioner obtained significant financial relief: the suspension of any payments for the loans and cards. No entity could seize his accounts or suspend his income, allowing the man to breathe easier. The next thing was to try to reach an agreement with the creditors to whom he owed the microcredits. However, when they did not agree, they chose not to appear or not to accept the proposals, good news for the pensioner, since the refusal of the creditors usually expedites the procedures and allows the Court to verify the good will of the debtor.
Finally, the request for exoneration of all debts was presented. The Second Chance Law allowed the neighbor to cancel his debt of 45,000 euros and finally get rid of his creditors and his debts. He was even allowed to keep his vehicle, which was at risk of repossession, instead of liquidating it in order to pay off some percentage of the loans.
Any person in a situation of insolvency can apply for the Second Chance Law and get rid of their debts. It is only necessary to meet a series of requirements:
Since the reform of the Bankruptcy Law in September 2022, the Second Chance Law procedure has become faster and more flexible, since it eliminates the non-obligatory nature of trying to reach a prior agreement with creditors.
In this way, the notary procedure, whose average duration was around 4 months (and whose average price was an extra thousand euros), disappears. There is even better news: the new LSO allows the debtor, as long as he meets the requirements, to maintain his habitual residence, as well as his economic activity. Before, the debtor had to liquidate all his assets to act in good faith and be able to exonerate what was left of the debt. Now he will no longer have to do it: he will be able to keep his house, his premises and his merchandise, without having to sell everything to face the debt. This is what happened to the man from Motril with his car.
The latest novelty introduced by this "New LSO" is that the exoneration of public debt is extended from 1,000 to 10,000 euros. That is, those who owed the Treasury and Social Security less than 10,000 euros will be able to eliminate their debt if they meet the requirements.
