The Second Chance Law allows natural persons — both individuals and self-employed — who are insolvent to obtain the total or partial cancellation of their debts and start afresh without the burden of the past.
In the Canary Islands we have successfully processed Second Chance procedures with debt cancellations ranging from €30,000 to over €500,000. The first consultation is free and confidential.
Those who can apply for discharge of unsatisfied liabilities (BEPI) include: natural persons (individuals), self-employed with debts arising from their business activity, and sole traders in insolvency. Requirements: be a natural person (not available for companies), be in actual or imminent insolvency, have acted in good faith, no criminal convictions for economic offences in the previous 10 years.
An insolvency petition is filed with the Commercial Court, which appoints an insolvency administrator. The administrator inventories the debtor's assets and liabilities (6–18 months).
If the debtor has assets, they are liquidated to partially repay creditors. The family home can be protected in certain circumstances.
After liquidation, the debtor requests discharge of unsatisfied liabilities. If the judge finds good faith, the remaining debts are cancelled (1–3 months).
In most cases, if the home is mortgaged, the bank retains its security interest even if the debtor obtains discharge of other debts. However, if the debtor can continue paying the mortgage, they can keep the home. Legal strategies to protect the family home must be analysed case by case.
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