Writing off bad debts and Law 25/2015 of 28 July on the «second-chance» mechanism

Abstract

In this article, the author examines the latest reforms introduced by Law 25/2015 of 28 July on the so-called «second-chance» mechanism allowing bad debts to be written off after insolvency proceedings. Specifically, the author examines the reforms introduced to (i) the requirement for good faith (art. 178.bis.3.1.° and 5.°v of the Insolvency Act), (ii) the reasons for having the benefit of the discharge of one's debts revoked (art. 178.bis.7 and 8 of the Insolvency Act), and (iii) the discharge clause allowing debts to be definitively written off even where the debtor has not honoured the repayment plan in full (art. 178.bis.8 of the Insolvency Act). With regard to the requirement for good faith, two matters are considered: firstly, with regard to the possibility that even where culpable insolvency proceedings are declared in accordance with the presumption of culpability under artículo 165.1.1.° of the Insolvency Act (on the grounds of failure to comply with the requirement to apply for insolvency proceedings), the requirement for discharge may still be met, taking into account the circumstances and provided that the judge has not found the debtor to have been malicious or seriously negligent; and secondly, with regard to the limitation on access to the information contained in the Public Insolvency Register referring to being granted the benefit of the discharge of one's debts. With regard to the reasons for having this benefit revoked, these are examined by distinguishing those that apply to type-«A» discharge (meeting a mínimum debt threshold) and those that apply to type-«B» discharge (honouring a repayment plan). The article also contains the latest judicial rulings in this matter.