1. Introduction
Royal Decree 1/2015 of 27th February 2015 on second chance programmes, the reduction of financial burdens, and other social considerations, is aimed at liberating natural persons from debts that they are unable to settle.
In this respect, the amendment, in the insolvency, labour and tax fields, seeks to give a second chance to those individual entrepreneurs or consumers who are faced with a failed financial project, as follows:
2. The benefit of exoneration from unsettled debts.
Although the general rule continues to be that an insolvent natural person is obliged to return those credits not settled with the liquidation of their assets, the new article 178 bis of the Insolvency Act introduces the premise of the benefit of exoneration from unsettled debts, which liberates them from the remaining debt. Specifically, said exception has the following requirements:
– The debtor must be a natural person.
– The insolvency proceedings must have concluded due to insufficient assets.
– The debtor must be of good faith.
– Insolvency proceedings classified as negligent are excluded.
– The debtor must have attempted to reach an out of court payment agreement.
– The debtor must have settled credits claimed against the estate and preferential claims, and if an out of court payment agreement has not been attempted, at least 25 per cent of the amount of the ordinary claims.
As an alternative to the last criterion, the debtor may accept submission to a payment plan, provided that: (i) collaboration obligations have not been breached, (ii) the benefit of exoneration has not been obtained during the last ten years, and (iii) an employment offer matching abilities has not been rejected during the four years prior to the declaration opening the insolvency proceedings.
The benefit of exoneration from unsettled debts shall be applicable to the unsettled part of the following credits:
1º. Ordinary and subordinated claims pending upon the date of conclusion of the insolvency proceedings, even if they have not been notified, with the exception of public law and child maintenance claims.
2º. The part of special preferential claims, which has not been satisfied with the execution of the guarantee shall be exonerated unless it has been included in a category different to an ordinary or subordinated claim.
As a consequence, those creditors whose claims have been extinguished may not initiate any kind of action directed at the debtor for the collection thereof.
3. Conclusion
The purpose of the new amendment is to give a second chance to the self-employed and individuals, who, once they have liquidated their assets, are unable to satisfy claims. Nonetheless, said mechanism may not be sufficient as it leaves out claims from public administration entities, this being the reason for which many have questioned its effectiveness in practice.
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23rd March 2015
