On September 26, the reform of the bankruptcy law entered into force with the aim of speeding up insolvency procedures. This measure has brought with it great changes for both debtors and creditors. From LEXBEN, Rubén Torrico and Borja Pardo explain what the most important developments have been and what they will mean for the Second Chance Law.
What are the main novelties of the bankruptcy reform?
There are three big changes. The first is the abolition of the Extrajudicial Payment Agreement, a pre-bankruptcy institute that has been shown to have not worked but was a necessary requirement in order to obtain debt relief.
Secondly, the possibility of being able to take advantage of this mechanism without the need to liquidate your assets but establishing a three-year payment plan.
And, thirdly, the change regarding the exoneration of the public debt, that with this reform only a maximum of 10,000 from the Public Treasury and 10,000 from the General Treasury of the Social Security can be forgiven.
What will it mean for the Second Chance Law?
Here we find ourselves with a double reality, and that is that there will be debtors in a situation of insolvency who benefited from the previous law for having, for example, a lot of public debt. There will be another type of debtors who will be more interested in the new law because they have assets that they do not want to liquidate and that had no place in the old regulations, so those who were previously discarded for these reasons can now benefit from this mechanism without having the obligation to liquidate all its assets.
What are the new requirements to apply for the Second Chance Law?
The new requirements to access debt forgiveness are as follows. The first of them, with some nuance, we drag it from the previous regulations, which is not to have a criminal record for crimes against property and against socioeconomic order, for false documents, against the Public Treasury and Social Security or against the rights of workers (sentence of more than three years).
The second requirement is new and consists of not having been sanctioned by a firm administrative resolution for very serious tax violations; The third requirement is that the contestant does not plead guilty or that in the previous 10 years he/she has been declared a person affected by a sentence of guilty qualification of the contest of a third party.
And finally, that you must collaborate with the bankruptcy administration and not provide false or misleading documentation or information in the bankruptcy application, otherwise it would be considered a guilty bankruptcy and you would not have access to exoneration.
What are the requirements to meet so that the debtor can keep his habitual residence?
This is a great novelty of the bankruptcy reform and we can find ourselves before two possible scenarios. The first of these would be in the event that the habitual residence has a lower value than your mortgage, in this case there is no prerequisite, you simply must be up to date with the payment of the installments and once the contest is over, the rest will be forgiven. debts and continue to pay your mortgage.
In the event that you do not have a mortgage or that the pending amount of the same is less than the value of the property, a payment plan must be made adjusted to the possibilities of the debtor to face the exempt credits, at the end of 5 years and having fulfilled the plan, the unsatisfied rest would definitely be forgiven.
The payment plan is reduced from five to three years, what can this mean for the debtor?
From my point of view, it is a positive development because the definitive EPI (Exemption of Unsatisfied Liabilities) period is shortened. It must be taken into account that this payment plan must be adjusted to the debtor's possibilities, so there should be no problem in satisfying it.
Can it be older than three years?
Yes, in the event that the debtor keeps his home, or when the amount of the payments depends exclusively or fundamentally on the evolution of the debtor's income and available resources.
Will the debtor be able to cancel his public debt (with the Treasury and with Social Security)?
The exemption of up to 10,000 euros may be requested with the Public Treasury and, where appropriate, another 10,000 with the General Treasury of the Social Security. The rest cannot be exonerated and will continue to owe it after the end of the contest.
What is your opinion of this reform?
In my opinion, it improves many aspects, such as the abolition of the Out-of-court Payment Agreement, which as it was configured did not make sense, and the fact of betting on the institutions pre-knowing them is a clear intention to try to save a lot of economic activity, but it is also true that we are in a country where businessmen and consumers are not used to being diligent enough to take advantage of these institutions.
Do you think that, ultimately, it is a more beneficial law for people in a situation of insolvency?
Clearly we have taken a very substantial and positive step with respect to the debtor in good faith, that is, the one who has not had sanctions or a criminal record, etc. It is a law that improves the process, simplifies it, makes it easier and, above all, faster. The only step backwards is in the exemption of public credit, but we will see how this matter will definitively turn out because, bearing in mind that we are talking about a reform that comes from transposing a European Union Directive that tells us about a full exemption of the debtor, we can have surprises in this area.
