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The second chance

Many are the people who, whether due to a ruinous business, repeated situations of non-payment, compulsive buying, or mortgage debts, find themselves in a situation of near illiquidity and have serious difficulties in paying off all their debts.

On these occasions, when they fall into this situation of delinquency, that is, when they fail to pay their credits, they usually find themselves subjected to a situation of distress due to this sensation of non-payment and even harassment by those who seek to collect the said debt.

Many of the messages they receive include, for example, inclusion in delinquency files or warnings to initiate legal actions, which would increase the expenses of the aforementioned debt.

The purpose of this publication is not to comment on when a debt can or cannot be included in delinquency files and what consequences there are from a supposed wrongful inclusion, but rather we will focus specifically on the new bankruptcy regulation, especially the second chance.

The New Regulation of the Second Chance

The new regulation of the second chance, especially after the transposition of Directive 2019/1023 carried out by Law 16/2022 of September 5, is found among articles 486 to 502 and came into force last year 2022, causing a series of major changes in the bankruptcy regulation, specifically in the bankruptcy procedure of a natural person.

There are many people who think, and we have corroborated this at the office, that the second chance implies canceling all debts. There have been many occasions when citizens who have over-indebted themselves come to the office, wanting almost immediate cancellation of all debt because they cannot make it to the end of the month.

Obviously, nothing is as easy as we would like, but the second chance, while it can achieve total debt cancellation, has another main goal, as otherwise, the economy would have unprecedented repercussions. Who, in their right mind, would make a contract for the provision of services with a person without having guaranteed the fulfillment of the obligation to pay for those services?

The fundamental principle of the second chance is focused on offering families a solution that can avoid social exclusion and allow them, when possible, to repay debts to the extent that their contributory capacity allows, permitting, even in some cases, the partial or total cancellation of the said debt.

Thus, cancellation is and must be a consequence of a battered contributory situation in the face of a significant debt and, especially, when we are faced with a situation of a bankruptcy without assets, that is, of people who have no goods.

We remember a person who had contracted a credit of 6,000 Euros and wanted to cancel the said credit through the second chance when he had a monthly income of 1,500 Euros and a Court had decreed the garnishment of his salary for the non-payment of the credit he wanted to cancel. In this example, we are not facing a situation of evident social exclusion, but a person who does not want to pay his credit, which turns out to be completely uneconomical, and, moreover, due to the small amount of the debt, it is more advisable to try to agree on payment terms than to seek exoneration, which would hardly be given.

The rule that must govern us to embrace the second chance or, rather, the objective of the application of the exoneration, is the reinsertion of the debtor into civil life, that is, that the debtor can take back control of their financial affairs that allows them to obtain a position from which to start again. This without forgetting that this restart or this starting again does not imply a clean slate to be able to get into debt again, because that would mean giving that drug back to the former addict.

We understand that, in addition, other types of socializing measures should be set in order to contribute to the development of responsible indebtedness on the part of the citizenry, who must know that this exoneration is not a situation that can be embraced annually, and, moreover, avoid thereby, the pathological debtor or the obtaining of irresponsible credit.

For their part, a series of mandatory compliance measures have already been established for financial entities that must be applied prior to the granting of consumer credit, but there are still entities outside the scope of this obligation, an issue that will be solved once the new and recent Directive (EU) 2023/2225 comes into force, which will give greater protection to consumers of consumer credit. But in the meantime, we will continue to clamor for this responsible consumption of credit and try to reintegrate these debtors.

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