In this article we try to explain in a simple way everything related to this law that can be a salvation for many people, but I must know how it works and the proper use of this law of the second chance is essential.
When debts overwhelm an individual, a company or a self-employed, there is the possibility of a measure that helps them to overcome this situation through a partial forgiveness of their debts, without this implying prejudice to the rights of creditors.
We are talking about the Second Chance Law, which is regulated by Royal Decree Law 1/2015, whose raison d’être is to allow the debtor renegotiate their debts and achieve exonerationof a portion of these.
What is the second chance law?
The Second Chance Law, just like the Bankruptcy Law, is part of ethics-based legislation. Its purpose is to rescue a person from a debt situation that is not possible for him/her to cope with, while also seeking to protect the right of creditors to collect their debt. Therefore, this law serves two purposes at the same time, so we can say that it fulfills a double function.
The philosophy behind the Second Chance Law
As its name expresses it, this law fulfills the purpose of opening the doors to whoever has gone through a hard economic setback. The philosophy behind this legislation is to cut the vicious circle of interests that do not allow the already burdened debtor to get out of the obligations it has with its creditors and overcome this stage. If this law were not applied, the person who has contracted the debt would never be able to satisfy it once he has crossed the threshold of interest that accumulates to make the debt grow, even after each payment.
On the other hand, the philosophy behind this law, is based on economic progress. It is supported by the incentive system, since it has been proven that the lack of second chance mechanisms makes the person decide not to risk getting out of his economic circle. Therefore, in the case of entrepreneurs, the lack of a second chance system makes the generation of new jobs frustrated.
So the Second Chance Law promotes fluidity in the economy, favoring the debtor and preserving the creditor’s rights.
Requirements of the Second Chance Law
As of 2015, the Second Chance Law is fully accessible to both individuals and legal entities. Until that year, individuals could not apply for exemption from unsatisfied liabilities when their assets were liquidated. This used to discourage them from using this route.
The requirements for accessing this law are as follows:
- Not having been declared guilty: the insolvency proceeding, i.e. the debtor person or company, cannot have incurred in the non-payment of its debts in a fraudulent manner or through serious fault. There comes a moment in which the debtor has the legal obligation to request the insolvency proceeding that leads to the Second Chance Law. In case of omitting to do so, knowing that he will incur in a situation of increasingly serious debt and that, therefore, he will not be able to pay it, he will be considered guilty of his situation. On the other hand, in order to benefit from this law, the insolvent party may not have lied about his insolvency situation, nor may he have proceeded to hide relevant documentation for the case.
- Not having been convicted of socioeconomic crimes: at the time of applying for the Second Chance Law, the person may not have a criminal proceeding in progress. On the other hand, he/she must not have been convicted of socio-economic crimes, false documentation or property offenses within the ten years prior to the application for bankruptcy.
- Having attempted a judicial payment agreement with creditors: such agreement must have been attempted using the services of a suitable professional. Regardless of whether the agreement has been successful, it is necessary to have attempted it.
- Having satisfied the insolvency claims and claims against the insolvency estate: this means that both the claims pertaining to mortgages and public claims and those originated after the declaration of insolvency must have been paid.
- Not having benefited from this law in the last ten years.
- Having acted in good faith: this means that one may not have refused a job offer commensurate with the abilities of the bankrupt in the last thirty years, nor may one have proceeded to liquidate the estate in order not to pay debts.
- Accept to be included in the Public Insolvency Register: in this way, the debtor’s situation can be known by those who have a legitimate interest in knowing it.
The Second Chance Law in practice
When all the above requirements are met, the debtor will be covered by the BEPI (Benefit of Exoneration of Unsatisfied Liabilities), whereby his debts will be forgiven or a new amount to be satisfied will be established in a certain number of installments. In this way, the debtor will have access to his second chance to get his life back on track and prosper again.
In another section of the blog, there is more information available about the Second Chance Law, specifically there are two specific topics that we deal with in another article of the blog, such as How-the-state-of-alarm-affects-the-second-chance-law and another article on How to take advantage of the second chance law
You deserve a second chance, you can get your life back with this law, cancel your debts.
Do not hesitate to contact us to tell us about your case through our email: email@example.com or, if you prefer, you can also call us at 602 226 895. Or you can leave us your contact information here.