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Changes established by the new Bankruptcy Law

This past September 6th, it was published in the BOE the bankruptcy reform in its Law 16/2022, of September 5, for the transposition of Directive (EU) 2019/1023 of the European Parliament and of the Council, of June 20, 2019, on preventive restructuring, debt exoneration and disqualifications, and on measures to increase the efficiency of restructuring, insolvency and debt discharge proceedings, and amending Directive (EU) 2017/1132 of the European Parliament and of the Council on certain aspects of company Law (Restructuring and Insolvency Directive).

This reformation, which has been long overdue, completely changes the pre-bankruptcy system and introduces several changes in Book One, the book relating to bankruptcy.

What are the novelties included in the new Bankruptcy Law?

Undoubtedly, the main innovation lies in the fact that it devotes an entire part (Book Three) to the insolvency proceedings of micro-companies, seeking to streamline insolvency proceedings in Spain, complying with the transposition of the European Directive on preventive restructuring, which is very present in the new Law.

New features are also introduced in the Benefit of Exoneration of Unsatisfied Liabilities (BEPI), a word that now loses the „B“ of benefit, for EPI, because it is intended to emphasize that it is „a right of the debtor natural person“. In such way, its formalities are simplified, including a new regime for the habitual permanent residence. Ultimately, the aim is that the prior liquidation of the debtor’s assets will not always be necessary in order for the debtor’s debts to be forgiven, but, of course, the Administration will continue to maintain its privileges.

The impossibility of exonerating public credits is maintained (except for a cap of 10,000 euros for the Treasury and another 10,000 euros for the Social Security) and it is expressly provided for the obligation of the credit information entities (default registers) to update the information of the exonerated persons, so that they can access financing.

Second chance after the bankruptcy reform

In summary, this reform has meant a significant change in our second chance system, finding ourselves before the recognition of a true right to a second chance. Although, of course, we will first have to check whether we fulfill the requirements. It is certainly a step forward, especially in the circumstances in which we live today. This will bring a glimmer of hope, regardless of how small it may be.

This reform has sought to mitigate the limitations to insolvency that were found in the previous law. Previously, this law was seen by many as unable to solve the real problem of bankruptcy, as bankruptcy proceedings were often dragged out for too long and almost 90% of them ended in liquidation. Given this, creditors had little or no expectation of collecting their claims, and the bankrupt companies had little or no expectation of getting ahead.

The Law will enter into force on September 26, 2022. However, the Book III (special procedure for micro-companies) and the DA 11ª, referring to deferrals and fractionation of tax debts by the AEAT, will enter into force on January 1, 2023.

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