Opportunities offered by the Second Chance law
Since the entry into force of the Second Chance Law, individuals and the self-employed have mechanisms designed to overcome their insolvency situation, in order to lighten their financial burden, but are these mechanisms effective?
Without a doubt, the Second Chance Law has turned out to be effective and every day more debtors take advantage of the provisions of this law to leave behind their debts. Therefore, if you are insolvent and cannot meet your enforceable obligations, the Second Chance Law is the most effective option to end your debts. But, what is the Second Chance Law?
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What does the Second Chance Law consist of?
As mentioned above, the Second Chance Law establishes mechanisms that allow self-employed and individuals to get rid of debts that are unpayable through the exoneration of unsatisfied liabilities.
It should be noted that, although the purpose of the Law is to offer a second chance to debtors, it also establishes measures to prevent them from using the mechanisms in an abusive or fraudulent manner. For said reason, the debtor must comply with a series of requirements to avail himself of the Second Chance Law:
- Must present an impeccable credit history, since those who have done so in the previous ten years will not be able to avail themselves of this mechanism.
- Must lack a criminal record in terms of crimes against assets, socioeconomic, documentary falsehood, against the Public Treasury and Social Security, or against the rights of workers in the previous ten years.
- Must have tried to reach an out-of-court payment agreement with its creditors with the help of the insolvency mediator, restructuring its debt including the payment of privileged credits and part of the ordinary ones.
If the out-of-court payment agreement is not approved, the insolvency mediator must request the consecutive insolvency proceeding. Once the insolvency proceedings have been completed due to liquidation or insufficient assets the debtor may obtain the benefit of the exoneration of unsatisfied liabilities.
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Benefit of the exoneration of liabilities
Such benefit allows the debtor to be released from the obligation of having to pay outstanding debts. Although the Second Chance Law provides the exception that the benefit of the exoneration extends to food credits and public credits, in reference to the latter, the case law of the Supreme Court has limited its amount, so that part of them can be exonerated.
We must not forget that, once the insolvency judge has granted the benefit of the exoneration of unsatisfied liabilities, this may be revoked during the following five years if the payment plan is not complied with or if the debtor’s economic situation improves substantially.
In short, the objective of the second chance mechanism is to make the debtor’s credits more bearable and even to get rid of them, trying to satisfy the creditors as far as possible. In other words, the Law understands that there is no sense in continuing to put pressure on the debtor when he is materially