Directive 2019/1023 obliges all Member States to establish a second chance mechanism to prevent debtors from being tempted to relocate to other countries that already host these institutes, with the cost that this would entail both for the debtor and for the your creditors.
Second chance procedure
This reform configures a more efficient second-chance procedure, expanding the list of exempt debts and introducing the possibility of exoneration without prior liquidation of the debtor’s assets and with a payment plan, thus allowing the latter to keep their habitual residence and their business assets.
The new system is based on the merit exemption in which any debtor, whether or not he is an entrepreneur, as long as he meets the standard of good faith, can exonerate all his debts, except those that, exceptionally and due to their special nature, are considered legally non-exemptable.
News regarding the previous procedure
The following should be highlighted:
- Is applicable only to the insolvent debtorwithout extending it to debtors barely afflicted, for the time being, of over-indebtedness.
- The good faith of the debtor is necessary to be able to access the exoneration.
- The rule that imposed the debtor who wanted to benefit from the exoneration to have unsuccessfully attempted an out-of-court payment agreement is repealed.
- Two are joined exemption modalities: exemption with liquidation of the active mass and exemption with payment plan. These two modes are interchangeable.
- The requirement that the debtor has not rejected a job offer in the four years prior to the declaration of insolvency is eliminated.
- The minimum term of ten years that should intervene between a request for exoneration and the exoneration previously granted to the same debtor is reduced, leaving it at five.
- The exoneration is extended to all bankruptcy debts and against the estate. However, various exceptions are maintained, such as food debts, public law debts, debts derived from criminal offenses or even debts for non-contractual liability. Thus, the exoneration of public law debts is subject to certain limits (10,000 euros to Social Security and 10,000 euros to the Treasury) and can only occur in the first exoneration of the unsatisfied liability, not in successive ones.
- In general, the duration of the debtor’s payment plan is reduced from five to three years.
- The assumptions that the Law until now in force contemplated to be able to access the exoneration notwithstanding the breach of the payment plan are eliminated.
This issue, as well as everything related to the new treatment of insolvency that the transposition of the EU Directive 2019/1023 entails, will be addressed in depth at the new Lefebvre Bankruptcy Congress, which will be held on September 29.