Second Chance Law after the bankruptcy reform

What is the Second Chance Law?

The second chance law is a legal mechanism that allows natural persons, both individuals and self-employed and entrepreneurs, who are in a situation of insolvency, to renegotiate or cancel their debts totally or partially. This law aims to enable people who have failed economically to start over without dragging a financial burden that prevents them from reinserting into the labor market and society.

What are the advantages of the second chance law?

The second chance law offers a series of advantages for the people who resort to it, among which the following can be highlighted:

• It stops the seizures and judicial or extrajudicial processes of debt collection while the procedure lasts.
• It achieves the exit from the files of defaulters once the procedure is successfully completed.
• It recovers the credit capacity and can access new financial products.
• It improves the personal and family situation by reducing the stress and anguish caused by debts.
• It fosters the entrepreneurial spirit by allowing to start new projects without the burden of indebtedness.

What are the disadvantages of the second chance law?

The second chance law also implies a series of disadvantages or requirements that must be taken into account before requesting it, among which the following can be mentioned:

• It is necessary to meet a series of requirements to be able to benefit from the law, such as having a level of indebtedness lower than 5 million euros, acting in good faith and not having been convicted of economic, social or property crimes in the last 10 years.
• It loses control over the assets if it opts for liquidating them to cancel all debts, which implies renouncing goods and rights that may have sentimental or professional value.
• It can affect personal or professional reputation by making public the procedure in the Public Bankruptcy Register and in the Official State Gazette.
• It may have to assume a payment plan for five years if it opts to keep the habitual residence and does not cancel all debts.

Pros and cons of the second chance law

The second chance law is a useful tool for people who are in a situation of over-indebtedness and who do not have the ability to meet their payment obligations. However, it is not a magic or free solution, but it implies a series of consequences and responsibilities that must be assessed before requesting it.

Therefore, it is advisable to have the advice of a professional specialized in the matter, who can analyze the specific case and offer the best option for each situation. Thus, you can make the most of the advantages of the second chance law and minimize its drawbacks.

The bankruptcy reform of the Second Chance Law 

What has changed with the bankruptcy reform?

The bankruptcy reform of the Second Chance Law that came into force on September 26, 2022 introduced important novelties in bankruptcy matters, among others:

1. The new regulation of the agreement, which eliminates the anticipated proposal, the creditors’ meeting and its written processing1.
2. The elimination of liquidation plans and the introduction of new rules for bankruptcies without mass.
3. The consolidation of the wording on business succession by sale of productive unit in bankruptcy.
4. The new regulation of claims against mass and insufficiency of mass.
5. The exclusion of public debts and others from the benefit of second chance.
6. The possibility of modification of agreements and qualification in this phase.
7. The introduction of important novelties that affect the status of bankruptcy administration With the aim of providing training

With the aim of providing a comprehensive and practical training to professionals who must help or advise debtors in a situation of insolvency; addressing the general principles of the insolvency process, the formal procedures and the necessary requirements, as well as the rules and mechanisms for bankruptcy and the ways and conditions to achieve debt relief, Lefebvre Formación organizes the "Course The second chance after the bankruptcy reform. Legal practice", composed of a cycle of 3 webinars, which will take place on May 31, June 7 and 14 from 4 to 6 pm.

The training will be given by the expert in the field José María Fernández Seijo, magistrate of the Mercantile Court 11 of Barcelona.