THE SECOND CHANCE: A Little-Known Mechanism to Completely Eliminate Debt

The popularly known as "second chance mechanism”Was approved more than four years ago (by Law 25/2015, of July 28). However, even today, it remains a great unknown for most of the population.

This mechanism allows to completely eliminate all debts of a natural person by obtaining the benefit of the exemption of the unsatisfied liability (“BEPI”, as it is technically known), as long as a series of simple requirements are met.


WHAT ARE THE REQUIREMENTS TO BENEFIT FROM THE SECOND CHANCE?

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

1) Not having assets (in case of having it, it must be liquidated within the bankruptcy procedure). However, on certain occasions, it will be possible to keep the habitual residence.

two) Being what the Law calls a “ bona fide debtor ”. To do this, it is necessary:

to) What the contest do not plead guilty , that is, that the cause of the insolvency is not a manifest negligence or will to fraud on the part of the bankrupt.

b) Not having availed themselves of the Second Chance Law in the previous 10 years.

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

d) Not having rejected a job offer "appropriate to your ability."


WHAT ARE THE DEBTS THAT MAY BE EXEMPTED?

Through the second chance mechanism, all debts of the bankrupt can be completely eliminated, to exception from:

- Public law debts (that are held, for example, in front of the TGSS or the AEAT).

- Debts derived from alimony pensions.

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

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


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

What's more, Even if said payment plan had not been fully complied with, if the debtor had allocated at least half of his income to its fulfillment (provided that they were not unattachable), 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 to do is get in touch with an office specialized in the matter, that can gather all the necessary information to prepare the bankruptcy file.

After that, it will be convenient try to reach an "out-of-court payment agreement with creditors". If no such agreement is reached, 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 looking after the interests of creditors, liquidating the assets (if any) and supervising payments and income throughout the duration of the procedure.

Finally, it will be necessary to present a formal request for exoneration of the unsatisfied liability before the bankruptcy judge that, if you have all the requirements described above, you 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 submitted in which, for 5 years, the debtor commits half of his unattachable 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 pending will be fully exonerated.


HOW LONG CAN THE WHOLE PROCESS TAKE?

A process of these characteristics usually lasts about a year, although said period could be extended depending on the specific characteristics of each case.


WHAT DOES THIS PROCESS COST?

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 in property with a pending mortgage. But, in any case, the total cost is always a tiny portion of the debt that can be exonerated.




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