Relief from personal debts after a business fails (segunda oportunidad)

Key rules

• Who qualifies: Any insolvent individual acting in good faith can apply, including the self-employed and entrepreneurs.
• Repeat relief: Relief obtained in the previous 5 years blocks a new application.
• Tax and Social Security: These debts are discharged only up to 10,000 euros per creditor.
• Excluded debts: Alimony, fines and penalties, and debts from crimes or wilful misconduct stay with you.

Who can get relief

Any individual in insolvency can ask for relief, including self-employed people and entrepreneurs. Your insolvency can be current or only imminent. The legal name is exoneración del pasivo insatisfecho, and Spain calls the process "segunda oportunidad" (second chance). It means a court cancels the debts you cannot pay.

You must have acted in good faith (buena fe). Relief is refused if any of these applies:

• You were convicted by a final judgment in the last 10 years of certain crimes. These include crimes against property, the socio-economic order, the Treasury, Social Security or workers' rights.
• A court found your insolvency was culpable.
• You seriously failed to cooperate with the court or the insolvency administrator.
• You already obtained relief in the previous 5 years.
• You acted fraudulently.

The two routes

You choose between two routes.

Liquidation. Your assets are sold in the insolvency procedure. Relief is granted as soon as the liquidation ends. If you have no assets, it is granted when the case is closed for lack of assets.

Payment plan. You commit to pay creditors under a plan lasting 3 years, or 5 years in other cases. The court grants provisional relief at the start. It becomes definitive when the plan period ends.

If you are not an entrepreneur, a simplified route exists. Micro-enterprises can use a special procedure.

How to apply

You can first try an out-of-court payment agreement with your creditors. If that fails or you skip it, file the application with the Juzgado de lo Mercantil (the commercial court) or the competent court. The timeline and checklist below show the order of steps. A lawyer should confirm plan terms and deadlines for your case.

Debts that stay

Relief does not cancel these debts:

• Alimony and maintenance.
• Civil liability for crimes, and for wilful misconduct or gross negligence.
• Fines and penalties.
• Claims for workers' damages.
• Debts of the insolvency estate.

Public debts are also excluded, with a limit. Tax and Social Security debts are discharged only up to 10,000 euros per creditor. The first 5,000 euros is fully discharged for each of the Tax Agency and Social Security. The next 5,000 euros is a further tranche.

Guarantors and administrators

If you personally guaranteed a business debt, you can benefit from the debtor's relief when the debtor is an individual. You can also ask for your own relief if you are an insolvent individual. In a payment plan, the creditor's rights against you as guarantor remain unless you are also discharged.

If you are an administrator held liable for company debts, you can apply as an individual. The debt from that liability can still be excluded if it comes from wilful misconduct or gross negligence.

Timeline and deadlines

• Try an out-of-court payment agreement with your creditors: before you go to court

• File the application with the Juzgado de lo Mercantil or the competent court: after the out-of-court attempt, if it did not work

• Liquidation route: your assets are sold and discharge is granted: immediately once liquidation ends, or on conclusion for lack of assets

• Payment plan route: court grants provisional discharge while you pay: from approval of the plan

• Payment plan route: discharge becomes definitive: at the end of the 3-year plan, or 5 years in other cases

Checklist

• Choose between the liquidation route and the payment plan route.

• List your debts and mark which ones stay: alimony, fines and penalties, debts from crimes, wilful misconduct or gross negligence, and workers' damages.

• Add up your tax and Social Security debts, since they are discharged only up to 10,000 euros per creditor, with the first 5,000 euros fully discharged for each of the Tax Agency and the Social Security.

What to watch out for

• Discharge can be refused: The court can refuse discharge if you were not in good faith, were convicted in the last 10 years of certain crimes (against property, the socio-economic order, the Treasury, Social Security or workers' rights), were found culpably insolvent, seriously failed to cooperate, or acted fraudulently. Be open with the court and your creditors, and ask a lawyer to review your history before you file.

• A recent discharge blocks a new one: If you already obtained discharge in the last 5 years, you cannot get another. Check the date of any earlier discharge before you apply.

• Some debts stay with you: Alimony, debts from crimes, wilful misconduct or gross negligence, fines and penalties, workers' damages and debts of the insolvency estate are not discharged. Plan to keep paying these after discharge.

• Tax and Social Security debts are only partly discharged: Public debts are discharged only up to 10,000 euros per creditor: the first 5,000 euros fully for each of the Tax Agency and the Social Security, then a further tranche of 5,000 euros. The rest stays owed. Ask the Tax Agency and Social Security for your balances and budget for what remains.

Frequently asked questions

Can I get debt discharge if I guaranteed my company's debts?

Yes, a personal guarantor who is a natural person and insolvent can ask for their own discharge. If the debtor is a natural person, the guarantor can also benefit from the debtor's discharge.

Can an administrator held liable for company debts get debt discharge?

Yes, an administrator who is a natural person can ask for discharge, but the debt from that liability can stay excluded. This happens when it comes from wilful misconduct or gross negligence. Other personal debts can still be discharged.