The Second Chance Law is gaining more and more prominence after the recent reform of the insolvency law and the boom in social networks.

Over the last year, thousands of people have applied for the Second Chance Law, a legal procedure that allows citizens to eliminate all their debts. This is a legal remedy that is on the rise. This mechanism is helping thousands of people who end up being exonerated of their debts.

This is a legal mechanism that made its first appearance in 2015, within the Bankruptcy Law. Given the difficulty and unfamiliarity of the process, it was something that was not in great demand. However, in September 2022 it underwent an important modification that opened the door to thousands of applicants, shortening the deadlines and reducing the formalities and costs of the procedure.

Starting from scratch with the Second Chance Law

The so-called Second Chance Law is a legal process that seeks to provide a solution for people who are overly indebted. It applies to individuals and the self-employed, i.e. anyone with financial problems in a state of current or imminent insolvency.

The accumulation of mortgage payments, car payments, credit cards, microcredits and debts with Social Security or the Tax Authorities, added to the expenses of life, can mean that a person is unable to make all the payments. When this situation arises or is imminent is when, after analysis by a lawyer, the Second Chance Law can be applied for.

To initiate the application, a number of simple requirements must be met, information must be gathered from the person concerned and an insolvency petition must be filed in a commercial court. In the case of having assets, there will be times when they could be liquidated to satisfy creditors and if there are still outstanding debts, these would be exonerated. In other words, eliminated.

This law is not just a way of cancelling debts and that’s it, it is a process where creditors are also tried to be harmed as little as possible. Sometimes, the assets of the individual concerned are placed at the disposal of the insolvency judge, giving rise to possible auctions where creditors can see their debts satisfied. For this reason, the situation of each person must be studied beforehand with the utmost professionalism and diligence.

In addition, it should be noted that, during the five years following the debt forgiveness, the user is responsible for notifying any substantial change in his or her assets, such as, for example, the receipt of an inheritance or the winning of a lottery.

Five main requirements to benefit from the Second Chance Law

In view of the above, there are certain requirements to benefit from the Second Chance Law, the main ones being the following five:

  1. 1.Being a natural person (worker, unemployed, pensioner or even self-employed).
  2. Having more than one creditor, i.e. having contracted debts with more than one entity or person.
  3. Be in a situation of current or imminent insolvency.
  4. Not have a record for socio-economic offences, among others.
  5. Be a debtor in good faith.

The purpose of these requirements is primarily to ensure that the person has not arrived at this situation intentionally, i.e. that he or she has acted in good faith and is unfortunately unable to pay the accumulation of debt.

This law is enabling individuals to get their lives back on track by leaving behind the burden of debt.

For more information contact Global Consulting