Second Chance Law
Law 25/2015, of July 28, on the mechanism of second chance, reduction of the financial burden and other social measures, known as the Second Chance Law that serves to cancel the debts of self-employed workers and individuals : it is a administrative process in which both individuals and freelancers can negotiate an out-of- court agreement with their creditors (bank, clients, suppliers), and in the event of not reaching any agreement, request the cancellation or exoneration of their debts through the courts .
Entities that help us cancel our debts
If we have financial problems and debts overwhelm us, we can request the opinion of professionals who advise us on how to take advantage of the Second Chance Law .
The Second Chance Law is the only legal mechanism that allows us to cancel our debts, thus helping us to lighten our financial burden.
It does not matter if we are self-employed, individuals, or over-indebted families, we all have the option of seeking professional opinion to get help and repair our financial situation.
If you still do not know if you can benefit from this law, below we explain what steps you have to follow to qualify for it, as well as providing you with useful related information to help you with this issue.
What steps should I take if I need to use this law?
The Second Chance Law is designed to help private and self-employed citizens who cannot face all their debts , thus avoiding having to face their payment with the guarantee of their assets (payroll, housing, vehicle ...) present and future.
Therefore, the Second Chance Law is aimed at self-employed workers and private citizens with debts that they cannot afford.
STEPS TO FOLLOW IN ORDER TO ACCESS THE SECOND CHANCE LAW
- Try to reach an out-of-court settlement
- Resorting to the courts and requesting bankruptcy
In the first instance, the Second Chance Law allows me to reach an out-of-court agreement to renegotiate my debts. Therefore, the first step that we will have to follow will be to try to reach an out-of-court settlement with the creditor or creditors to whom we owe money under the tutelage of a judge .
For this we will need to meet the following requirements:
- Assign part of the assets or shares of the company itself to the creditor with a value less than or equal to the amount owed.
- Propose a viability plan and a payment schedule to settle debts in less than 10 years.
In this process we will be able to liquidate our assets to be able to face the payment of debts , or to agree on a payment schedule that we must comply with.
The negotiation process to reach an out-of-court agreement may not take more than two months .
If we are interested in initiating the procedures to take advantage of the Second Chance Law, we can download the application model published by the Ministry of Justice, in which we will provide information about our personal, economic and original situation, as well as the causes of our insolvency.
If this process does not work and we are unable to reach an agreement, we will go to court to request the cancellation or exoneration of our private debts .
The negotiation process to reach an out-of-court agreement may not take more than two months.
Figure of intermediation, who helps me in the negotiation?
The out-of-court settlement process will be managed under the supervision of a judge , who may have the figure of a bankruptcy mediator who mediates between the debtor and his creditors .
In the case of exhausting the negotiation process without reaching an agreement , the debtor and bankruptcy mediator may request before the judge on a voluntary basis, the bankruptcy , thus activating the judicial process.
How to apply for legal proceedings and request bankruptcy
In the event that the attempt to reach an out-of-court settlement with the creditor has failed, it is time to activate the Second Chance Law route . In other words, the consecutive bankruptcy phase will begin in which we can get the judge to cancel the total debts.
What conditions must I meet if I want to file for bankruptcy
If a debtor files for voluntary bankruptcy, the judge may decide to exonerate him of all his debts, provided that two requirements are met:
- We do not have money or assets to face debts
- Show that we are acting in "good faith"
When are we considered to be acting in "good faith"?
For the debtor to be considered in good faith, they must meet the following requirements:
- You will have tried to reach an out- of- court settlement before going to the bankruptcy
- Not to be considered guilty in the bankruptcy
- Not having benefited from the Second Chance Law for ten years upon request
- Not having been convicted of crimes against property, socioeconomic order, document falsification, against the Public Treasury and Social Security or against the rights of workers
- Not having rejected an offer of employment “adequate to your ability” four years prior to the request
Can I avoid paying all my debts?
No , the law establishes that public law credits and food credits cannot be exonerated. In this way, although we are free to pay our private debts with banks or suppliers, we will have to face the payment of the debts contracted with the Tax Agency or Social Security , as well as the maintenance of our children .
Don't forget that ...
The Second Chance Law does not eliminate all debts: we refer to debts contracted with the Treasury and Social Security, or new debts.
Public Bankruptcy Registry, Who can check my data?
The Public Insolvency Registry will register for a period of five years the obtaining of the benefit granted when our debts with the creditor or creditors are canceled .
As dictated by the Second Chance Law, said registry may be consulted by:
- People with a legitimate interest in finding out about our situation: banks or potential customers and suppliers
- Public Administrations and jurisdictional bodies
Will my debts disappear forever?
Debts can be claimed by any creditor who requests a revocation of the exemption granted, during the five years following its admission , when it is considered that the debtor has acted in bad faith or has undeclared income .
Therefore, in order to avoid problems in this regard, it is essential that we comply with the conditions required by the Second Chance Law. Only in this way, we can be sure that we achieve a definitive cancellation of our debts.
The exoneration of debts may be revoked if the breach of "good faith" is demonstrated.