Second-chance law: how to obtain the legal discharge of your debts

The second chance law (ley de segunda oportunidad) allows an insolvent individual acting in good faith —both private consumers and self-employed professionals— to write off the debts they cannot pay. Its technical name is discharge of unsatisfied liabilities (exoneración del pasivo insatisfecho), and it is governed by the Consolidated Insolvency Act. It is neither a privilege nor a fraud: it is a regulated court procedure, backed by EU law, that lets someone who has fallen into over-indebtedness make a fresh start. After the 2022 reform and the doctrine handed down by the Spanish Supreme Court in February 2026, its scope is now broader than many debtors assume.

What the discharge of unsatisfied liabilities is and which debts it clears

The discharge of unsatisfied liabilities is the mechanism the Insolvency Act reserves for individuals to be released from the debts their assets cannot cover. It is governed by the Consolidated Insolvency Act (Texto Refundido de la Ley Concursal), approved by Royal Legislative Decree 1/2020, and its basic requirement is set out in its article 486: it may be requested by any individual debtor, whether or not a business owner, who is in a situation of insolvency. In practice, it clears outstanding debts —personal loans, credit cards, overdrafts, guarantees and much of the public debt— once the procedure concludes, so the debtor no longer carries them for life.

The current framework stems from Law 16/2022 of 5 September, which reformed the Insolvency Act to transpose Directive (EU) 2019/1023 on restructuring and insolvency. That reform made access considerably easier: it removed the duty to first attempt an out-of-court payment agreement and dropped requirements that had excluded many debtors, such as not having turned down a suitable job offer.

Who qualifies: the good-faith debtor

The benefit is reserved for the good-faith debtor, and that is the requirement that decides most cases. Good faith is not assessed subjectively but by reference to the grounds for exclusion listed in article 487 of the Consolidated Insolvency Act. Discharge is unavailable, among other cases, to anyone convicted in the previous ten years of offences against property, against the socio-economic order, of documentary forgery, against the Public Treasury, Social Security or workers' rights; anyone penalised for very serious tax infringements; or anyone who has given the court false or grossly inaccurate information, or acted recklessly or negligently in creating or worsening their insolvency.

Outside those defined grounds, good faith is presumed. The takeaway matters: documenting the origin of the insolvency and the debtor's conduct in an orderly way is, in practice, where the procedure is won or lost —all the more since the Supreme Court reinforced the court's duty to review this of its own motion, as explained below.

The two routes: discharge through liquidation or a payment plan

The reform sets out two routes to discharge under its article 488, and the choice carries real financial consequences:

• Discharge through liquidation of the assets. The debtor's attachable assets are realised to pay creditors as far as possible and, once done, the remaining liabilities are discharged. This is the natural route where assets are limited.
• Discharge under a payment plan, without prior liquidation. Governed by articles 495 and following, it allows the debtor to keep assets —notably the main home— in exchange for devoting available income to a court-approved payment plan. Under its article 497, the plan generally lasts three years, extendable to five where the debtor keeps their main home rather than selling it, among other cases.

Choosing the right route requires weighing the assets, the income and what the debtor wants to protect; it is not automatic, and it determines whether the debtor keeps their home.

Which debts are cleared and which are not

As a rule, discharge releases the debtor from all liabilities outstanding after the liquidation or the payment plan. The law itself, however, excludes certain debts. Article 489 of the Consolidated Insolvency Act leaves outside the discharge, among others, maintenance debts, debts arising from civil liability for a crime, much of the debt from non-contractual civil liability, fines and —the historically most disputed point— part of the public debt. It is worth knowing in advance what is cleared and what is not, so the process is not built on mistaken expectations.

Debt with the Tax Agency and Social Security: the Supreme Court's 2026 doctrine

The treatment of public debt —amounts owed to the Tax Agency, Social Security, the autonomous regions or town councils— was the most contested point of the second chance regime. Article 489.1.5 of the Consolidated Insolvency Act excludes those claims from discharge save for some limited quantitative thresholds. After the Law 16/2022 reform, it was disputed whether that exclusion complied with EU law; the Court of Justice of the European Union, in its judgment of 7 November 2024 (joined cases C-289/23 and C-305/23), clarified that excluding public debt is only permissible where it is duly justified and respects the principle of proportionality.

The question was settled in Spain by a group of judgments of the First Chamber of the Supreme Court of 18 February 2026 —among them STS 264/2026 (ECLI:ES:TS:2026:440)—, the first full doctrinal ruling on the matter. Three key rules emerge. First, the thresholds of article 489.1.5 apply per public creditor, so debt is discharged in full up to EUR 5,000 and, beyond that, 50% up to a maximum of EUR 10,000 against each administration separately. Second, subordinated public debt —interest, surcharges and penalties— is discharged in full, because the privilege is not proportionate against claims of that nature. Third, an existing derivation of liability for tax or Social Security debts does not, on its own, bar the discharge, unless it reflects fraudulent conduct equivalent to the most serious infringements. We analyse this doctrine in detail in our piece on second chance and public debt.

Effects: what happens once the discharge is granted

Once discharged, the debtor is no longer bound by the debts covered and creditors can no longer claim them. Under the liquidation route the discharge is in principle final; under the payment-plan route it is granted provisionally and consolidates on completion of the plan, though it may be revoked if, within the statutory period, it is shown that the debtor concealed assets or income or substantially improved their situation for non-fortuitous reasons, under article 493. Once discharge is obtained, the debtor may also request removal of the cleared debts from credit blacklists.

Frequently asked questions about the second chance regime

Can I write off all my debts?

In most cases nearly all liabilities are cleared. Excluded are the debts the law declares non-dischargeable —maintenance, certain civil liabilities, fines and the part of the public debt exceeding the article 489 thresholds—, so a prior review of the debt portfolio is advisable before starting the procedure.

Can I keep my main home?

Yes, if you take the payment-plan route rather than liquidation and the circumstances allow it. In exchange for keeping the home, the payment plan may run for up to five years under article 497. It is one of the most important decisions in the procedure and must be assessed case by case.

Are debts to the Tax Agency and Social Security cleared?

Partly. Following the Supreme Court's doctrine of 18 February 2026, public debt is discharged in full up to EUR 5,000 and at 50% up to EUR 10,000 per administration, and interest, surcharges and penalties are cleared entirely. For many self-employed people with debts to the authorities, the real scope for discharge is now wider than it was a few years ago.

Can I qualify if I am self-employed?

Yes. The second chance regime is open to any individual, whether or not a business owner, so a self-employed person who cannot pay their debts is one of its natural beneficiaries, including debts incurred in the course of their activity.

How long does the procedure take?

It depends on the route chosen and the court's workload. Discharge through liquidation can be resolved in a few months; discharge under a payment plan runs for the three or five years of the plan, after which the discharge consolidates.

How much does the second chance procedure cost?

The procedure is handled before the Commercial Court and involves court-agent fees and, where applicable, insolvency-administrator costs. Depending on your income, you may qualify for free legal aid. In an initial consultation we assess viability and cost before starting any step.

How we help you with the second chance law at RCM Legal

There are two mistakes that, in practice, ruin good cases: starting the procedure without having properly documented the origin of the insolvency and the debtor's good faith —now that the court reviews both of its own motion— and choosing badly between liquidation and a payment plan, risking the loss of a home that could have been kept. Add to this a very common misconception about public debt, which is neither wiped out entirely nor fully excluded, but discharged on the terms the Supreme Court has set.

At RCM Legal we study your financial situation, assess frankly whether good faith is present and which debts could be cleared, choose the most favourable route and run the procedure from start to finish before the Commercial Court, including the defence against opposition from the Tax Agency or Social Security. If you are looking for a second chance lawyer in Murcia to clear debts you cannot pay, tell us about your case and we will tell you, with no obligation, what part of your liabilities could be discharged.