What is a no-asset bankruptcy?
A no-asset bankruptcy (concurso sin masa) is a type of insolvency proceeding intended for individuals or companies that do not have sufficient assets to cover even the basic costs of the bankruptcy proceeding.
That is: there is no estate to pay fees, court costs, or creditors.
The reform of the revised text of the Insolvency Law (Law 16/2022) configured it as a much faster and simplified process, especially useful for individuals seeking access to the Second Chance mechanism.
When is it considered that there are no assets?
A judge can declare a no-asset bankruptcy when it is proven that the debtor:
- has no attachable assets,
- does not have sufficient income to cover the costs of the bankruptcy,
- has ceased their activity (if they were self-employed or a company),
- their estate is non-existent or so scarce that it would not allow payment to an insolvency administrator.
This type of bankruptcy is very common among:
- self-employed workers who closed down without assets,
- indebted individuals without property ownership,
- dissolved and inactive companies.
What advantages does no-asset bankruptcy offer?
The greatest benefit is speed.
Unlike ordinary bankruptcies, here:
- no insolvency administrator is appointed (except in exceptional cases),
- there is no agreement phase,
- there is no liquidation phase,
- there is no need to wait months or years to move forward.
The process is directly oriented towards allowing the debtor to request the exoneration of unsatisfied liabilities (cancellation of debts).
What effects does the declaration of no-asset bankruptcy produce?
These are the most relevant ones:
Simplified procedure
The complexity and costs of the bankruptcy are reduced.
No insolvency administrator is appointed
Unless creditors detect irregularities and request one, assuming the cost.
Direct access to exoneration
The debtor can request debt exoneration almost from the beginning, without going through slow liquidations.
Lower procedural burden
Fewer procedures, fewer requirements, more agility.
What should creditors do?
If a creditor considers that:
- the debtor does have undeclared assets,
- or that there has been some irregular action,
they can request that an insolvency administrator be appointed.
However, they will have to pay the costs themselves, which curbs unfounded requests.
Practical example
Imagine a self-employed worker who closed their business after accumulating:
- debts with banks,
- credit card debts,
- unpaid invoices,
- a small attachment (embargo).
They own no home, have no assets, nor sufficient income.
In these cases, a no-asset bankruptcy allows them to:
- process the procedure very quickly,
- avoid costs they could not pay,
- and request the Second Chance mechanism to cancel debts.
No-asset bankruptcy and the Second Chance: how they are connected
In practice, a no-asset bankruptcy is a direct route towards the exoneration of unsatisfied liabilities.
It allows the debtor to:
- initiate the bankruptcy,
- prove that they have no assets,
- and request the cancellation of their debts without long phases.
This makes it a key tool for individuals who need to start over.
Frequently Asked Questions (FAQ)
Will I always be granted a no-asset bankruptcy if I have no assets?
Not always. You must provide documentary proof that there are no sufficient assets and that the insolvency is real.
Is it necessary to hire a lawyer?
Yes, the bankruptcy must be filed with a lawyer and a court solicitor (procurador).
What happens if an asset appears later?
The bankruptcy can be reopened and that asset used to pay creditors.
Professional CTA
If you have no assets and are in a situation of insolvency, a no-asset bankruptcy may be the fastest way to resolve your situation and access the Second Chance mechanism.
As a lawyer specializing in insolvency law, I can help you to:
- prepare the documentation,
- file the bankruptcy correctly,
- and request the exoneration of your debts.
Write to me and we will review your case personally.