Spain's Second Chance Law allows for debt exoneration

Under Spain's current insolvency framework, specifically following the reforms introduced by Law 16/2022, individuals can seek the exoneration of unsatisfied liabilities (EPI), commonly known as the ‘Second Chance Law’. This mechanism allows natural persons to have certain debts canceled after meeting specific legal requirements.

One significant aspect of the current law is the ability for debtors to cancel debts without necessarily losing their primary residence. By opting for a payment plan rather than a liquidation of assets, a debtor's patrimony, including their home, may be preserved. A standard payment plan generally lasts three years, though this can be extended to five years if the primary residence is not sold.

To qualify for this protection, debtors must meet several criteria: they must act in good faith, maintain mortgage payments for secured credits (as secured debts are not exonerated beyond the value of the guarantee), and present a viable payment plan for judicial approval. Professional assistance is often utilized to manage the complex administrative and judicial stages, including the analysis of income, assets, and existing obligations.