THE SECOND CHANCE LAW

Accelerate your business with these expert tips on "The Second Chance Law". Analyse and discover this TIP!

No doubt you have heard the saying that "everyone has the right to a second chance". The Second Chance Law comes to alleviate the undesirable consequences that the successive economic crises, especially the one caused by Covid19, have had on the business fabric: redundancies, closures, layoffs, have caused human dramas such as loss of assets and the result of years of work and effort and ultimately the loss of control over their lives.

In these circumstances, it is only natural that the opening sentence takes on its full meaning and materialises in a law aimed at facilitating a legal way out for these people: the Second Chance Law.

What is the Second Chance Law?

Law 25/2015 on Second Chance is a regulation aimed at helping individuals and the self-employed to restructure their debts and even to cancel them. To do so, it uses a separate procedure in different phases. In order to take advantage of this law, it is necessary to put yourself in the hands of a specialist expert who will take care of the necessary procedures. The aim is to get out of the insolvency situation and to a person has the opportunity to get his or her life back on track and even to risk new initiatives, without having to carry around indefinitely a burden of debt that he or she will never be able to repay".

Mechanism of the Law: 

Let's take a look at the path that a person wishing to take advantage of this rule must follow:

Out-of-court settlement, ASP

The first step is to complete the application form in which all the information necessary to initiate the procedure is provided. This application is filed with a notary in the case of individuals or with the commercial register in the case of a company. An insolvency mediator is then assigned to start the search for an out-of-court payment agreement (AEP).

These agreements with creditors aim to restrict debts in order to facilitate their repayment. 

What happens if there is no agreement:

If no agreement is reached or if the assets are insufficient, the insolvency mediator will request the opening of a consecutive insolvency proceeding before the insolvency judge. Within this consecutive insolvency proceeding, on the one hand, the liquidation of the assets will be processed in order to apply them to the payment of the debts and, on the other hand, the "request for exoneration of the unsatisfied liabilities" will be processed.

As far as the liquidation of the estate is concerned, it is necessary to have the advice of a good specialised lawyer who could eventually save the habitual residence.

With regard to the so-called Benefit of Exoneration of Unsatisfied Liabilities, this can be provisional or definitive. If it is provisional, the debtor must assume a payment plan that can last up to 5 years. If it is definitive, the debts will be cancelled automatically.

The BEPI marks the end of the second chance process and the person will have cancelled his or her debts and will be able to start again.

How much does it cost to take advantage of the Second Chance Law? 

It depends on the duration of the procedure, which can range from 4 months to 5 years. It should also be taken into consideration that in addition to the costs of the specialist lawyer, the debtor will bear the costs of the notary, the solicitor and the insolvency mediator. To give an indicative figure, a law firm offers its specialised services for €2,400, with the option of instalments of €100 per month.

Advantages of the Second Chance Law.

The Second Chance Law is a way to cancel debts and is a good alternative to simple refinancing, which does not always work. 

On the other hand, the out-of-court settlement involves stopping garnishments and suspends the accrual of interest.

The cancellation of public debts is often complex, as administrations are reluctant to negotiate credit.

Thanks to the BEPI, the debtor can be relieved of particularly relevant debts. in case of self-employment.

These are all sufficiently important advantages to take the time to seriously consider this option, especially if the person is in a position to return to entrepreneurship.

The market is increasingly valuing the experience gained from a business failure, and this makes it easier to find a job if needed.

Entrepreneur's Law. Protecting the vital assets of the entrepreneur (very unsuccessful...).