What is the Second Chance Law?
The Second Chance Law allows individuals and self-employed workers to cancel all or part of their debts when they are unable to pay them.
It is a legal mechanism included in the Consolidated Text of the Insolvency Law which, after the 2022 reform, has become more accessible, faster and more flexible.
Its purpose is clear: to provide a real way out for those trapped in over-indebtedness and allow them to start afresh without impossible burdens.
Who can benefit from the Second Chance?
It can be requested by:
- individuals with debts they cannot pay,
- self-employed workers who have closed their business or whose income no longer covers their obligations,
- small business owners burdened by loans, credit cards or supplier debts.
The most common profile is people who have tried to meet their obligations, but whose financial situation no longer allows them to do so.
Main requirements for accessing debt discharge
For a judge to grant the discharge of unsatisfied liabilities (EPI), the following requirements must be met:
1. Being in a situation of insolvency
Current or imminent. It is not necessary to wait until all debts are unpaid.
2. Having at least two creditors
The law requires plurality: banks, credit cards, Tax Agency, Social Security, private financing, suppliers…
3. Being a debtor in good faith
This implies:
- not having been convicted of economic crimes in the last 10 years,
- not having rejected suitable job offers (in the case of non-business persons),
- not having used this mechanism in the last 2 years without liquidation or in the last 5 years with liquidation.
4. Lacking sufficient assets
Or having liquidated available assets.
5. Filing for insolvency proceedings
With a lawyer and court representative.
What debts can be cancelled with the Second Chance?
✔ Personal loans
✔ Credit cards
✔ Micro-loans
✔ Personal guarantees
✔ Supplier debts (self-employed)
✔ Bank loans
What about debts with the Tax Agency and Social Security?
Since 2022, it is possible to discharge up to:
- €10,000 with the Tax Agency
- €10,000 with Social Security
Amounts exceeding these limits can be paid in installments within the payment plan.
How does the procedure work?
The process can be carried out with or without liquidation, depending on whether the debtor has assets or not.
Step 1: Filing for insolvency proceedings
This is the starting point. It analyzes:
- the financial situation,
- available income,
- existing assets,
- debts.
Step 2: Judicial assessment of good faith
The judge reviews whether the applicant meets the requirements.
Step 3: Discharge of unsatisfied liabilities
Cancellation can be granted through:
Option A: With liquidation
If there are no assets or they are insufficient.
Option B: Without liquidation (payment plan)
If the debtor has income, a 3 to 5-year plan can be agreed upon.
Advantages of using the Second Chance
- Cancellation of most debts.
- Stopping of seizures and executions.
- Possibility of keeping the primary residence in some cases.
- Recovery of financial peace of mind.
- Real economic restart.
The law is designed so that people can start over, not remain trapped for life.
Practical example
A person has:
- €32,000 in loans,
- €12,000 in credit cards,
- €5,000 with suppliers,
- €3,000 with the Tax Agency.
They have no significant assets and their income does not cover the payments.
Through the Second Chance, they could achieve a nearly total discharge of their debts.
Frequently Asked Questions (FAQ)
Will I lose all my assets if I apply?
It depends on the case. The primary residence can be preserved in certain circumstances.
What happens if my financial situation improves afterwards?
It only affects if fraud or an extraordinary and unforeseeable improvement is proven.
Can I get into debt again or apply for loans afterwards?
Yes, once the debts are cancelled, the person starts from scratch.
Professional CTA
If you are in debt and see no way out, the Second Chance Law could be the solution.
As a lawyer specialized in insolvency law, I assist you with:
- feasibility analysis,
- filing for insolvency,
- and applying for the discharge of unsatisfied liabilities.