Second Chance Law
Objective of the Law
The Second Chance Law is a legal mechanism that allows individuals, self-employed workers, and private persons to fully or partially cancel their debts when they are unable to meet them, offering a fresh financial start.
Beneficiaries and Requirements of the Law
Any natural person, private individual, or self-employed worker may benefit from it, provided that they:
Are in a situation of current or imminent insolvency and have debts not exceeding €5,000,000.
Have acted in good faith, meaning they have not hidden assets or debts and have not worsened their insolvency.
Have no criminal record in the last 10 years for economic offences, nor have been sanctioned in the last 10 years for very serious tax, social security, or labour-related infringements, nor have a final liability ruling issued against them in that period.
Have not benefited from this law in the last decade.
Have more than two creditors.
Debts that can be cancelled
The law allows the cancellation of most debts, such as:
Personal loans.
Credit cards.
Microloans.
Debts with the Tax Agency (Hacienda), Social Security, and other public bodies (town councils, DGT, provincial councils, etc.), up to a limit of €10,000 each.
Remaining debt from a mortgage foreclosure, meaning that if the bank has already enforced the mortgage (the property has been auctioned or repossessed) and the amount obtained has not covered 100% of the mortgage, the remaining balance is considered ordinary debt and can be fully cancelled.
De facto dation in payment: By handing over the property within the insolvency process, the debtor may be released from all outstanding mortgage debt that the property value does not cover.
Non-cancellable debts
Alimony debts, compensation derived from criminal offences, and debts with the Tax Agency, Social Security, and other public bodies (town councils, DGT, provincial councils, etc.) that exceed €10,000 each.
Mortgage-secured debt: Debts backed by real collateral are excluded from discharge up to the amount covered by that guarantee. This means that as long as you wish to keep the property, you must continue paying the instalments.
Duration of the Judicial Process
Between 6 months and 1 year
