The Second Chance Law created in 2015 to allow natural persons - individuals and self-employed people - in a situation of insolvency to cancel 100% of their debts has been modified in 2022. This is a reform that brings important news in regarding the deadlines to cancel debts. Therefore, it is important to take into account the new deadlines, the new terms and conditions and some of the most important modifications in this new Second Chance Law.
What has been sought with these modifications is to make the process faster and less expensive for indebted people who resort to this regulation to obtain the exoneration of their debts. The most striking thing is the elimination of the bankruptcy mediator and the exoneration with conservation of the asset with a payment plan. Thus, in this way it will be possible to access the elimination of mortgage debts, quick loans, with the Treasury, with Social Security and other obligations in a simpler way.
After this reform, the terms have been shortened to a maximum of 18 months to achieve the exoneration of debts. It should be noted that before, the term was between 2 and 5 months for the extrajudicial phase and 6 to 8 months for the judicial phase in the event that there are no assets to liquidate. If there are assets to be liquidated, you must enter a third phase, called qualification. There you can go up to a maximum of a year or a year and a half. Thus, things, now the deadlines have been shortened so that they do not extend beyond a year and a half from the start of the procedure
Now, with this new reform, it is no longer necessary to carry out an extrajudicial phase, which shortens the time. In that phase it was about reaching an agreement with the entities to cancel a part of the debts. However, since the end of 2022, it is already going directly to the judicial phase where it is possible to request the cancellation of 100% of the debts, if the judge so grants it.
Thus, it is no longer necessary to carry out the previous procedures that involved several months of negotiations. Now, the documentation is gathered and presented directly to the court, where either the total cancellation or a partial cancellation and a payment plan can be requested. Something that a law firm will assess in a more appropriate way to study the case and decide what is best for the client with the requirements they have.
It should be noted that the elimination of the extrajudicial phase, which also entails the suppression of the figure of the bankruptcy mediator, lowers the costs of the process by approximately 30%. Thus, now it is cheaper and faster to request the cancellation of debts.
In short, the process must be resolved in a maximum of 18 months to achieve either the total or partial cancellation, if the judge admits the procedure.
Regarding amounts, it must be a debt that does not exceed 5 million euros and have acted in good faith without having deceived creditors at the time the loan was requested. Those applying for the first time or those who have applied for the second time can also apply if five years have passed since the first time. At the same time, it is also established that you must have debts with at least two different creditors.
In the event that one of those affected is a public body, such as the Treasury or Social Security, the maximum limit that can be canceled is 10,000 euros with each of them and up to a maximum of 20,000 euros combined. If these amounts are exceeded, then our lawyer will study how to formulate the partial cancellation with a future payment plan to be able to take away a part of what is owed.
