Condonation of debts to natural persons or “benefit of exoneration of unsatisfied liabilities”

Article 178 bis of the Bankruptcy Law.

For some time it has been possible for people who have accumulated debts that they cannot face to obtain a declaration of “forgiveness” and elimination of debts from the Civil or Commercial Judge. In Anglo-Saxon law it is known as a “fresh start”.

The benefit is designed both for “normal” people and for “entrepreneurs”, having to study the origin of their debt.

The process to obtain said “forgiveness” or elimination of debts begins with a formal request in the Notary or Mercantile Registry, having to deliver a series of regulated documentation.

During this process, the debtor will try to reach an out-of-court payment agreement with his creditors (people to whom he owes money). For this, the most normal thing is that a bankruptcy mediator is appointed who will help you carry out said negotiation.

Normally, the debtor offers an extrajudicial payment agreement that contains discounts (percentage reduction of the debt) and waits (new term to pay it).

As an example, let’s think of a debtor who has a total debt of €100,000 with several creditors and offers them a 50% deduction agreement and a 5-year waiting period. In the event that the creditors accepted, the debtor would end up paying €50,000 in 5 years (with normally ascending installments, which could be €2,500 in the first year, €5,000, €7,500 in the second year, €10,000 in the third year and €25,000 in the fifth year). ).

In the event that the agreement with the creditors fails, the debtor will be declared insolvent and the process will be judicialized. After a series of procedural procedures and the liquidation of the debtor’s assets (the sale of all the assets he has), the Judge will be asked to exonerate the unsatisfied liability or “second chance”.

The procedure is quite procedural and complicated. In addition, a series of regulated requirements must be met to obtain the “second chance” so it is necessary to have a lawyer throughout the process.