In September 2020, the first argument of the preamble to Royal Decree-Law 1/2020, which approved the consolidated text of the Insolvency Law, stated:
“The history of the Insolvency Law is the history of its reforms. It is difficult to find a law that, in so few years, has undergone so many and such profound modifications.”
Nothing could be truer than this reality, as there is no substantive legislative text in our legal system that has undergone as many changes as the Insolvency Law. What had historically been a sectoral law aimed at addressing major social problems has experienced, especially in the last decade with the entry into force of the so-called Second Chance Law, an expansion of such magnitude that we can affirm that Insolvency Law has gone from being a simple sectoral branch of Commercial Law to an autonomous branch of Law. This branch has managed to share prominence with the major historical branches of Civil, Labor, Criminal, Tax, and Fiscal Law.
At the prestigious Faculty of Law at the University of Barcelona, for example, Insolvency Law was not taught to students, being given only a few minutes in the last class of Commercial Law. However, it is now an autonomous subject, with countless teaching hours in classes, master’s programs, and postgraduate courses at various schools and universities.
Insolvency legislation in Spain has experienced its peak over the last decade, especially due to the entry into force of the Second Chance Law for the treatment of personal insolvency. From the Lex Poetelia Papiria of Ancient Rome, through the Principle of Universal Patrimonial Responsibility in the Middle Ages, enshrined in Article 1,911 of the Civil Code of 1889 (“The debtor is liable for the fulfillment of obligations with all present and future assets”), and its subsequent codification from the Bankruptcy Law of the Commercial Code of 1829, the Civil Procedure Law of 1881, the Suspension of Payments Law of 1983 and its reform in 1995, culminating with the entry into force of the Insolvency Law in 2003 and its most significant reforms in 2011, 2015, and 2022.
While the 2003 Insolvency Law introduced a new paradigm for creditor proceedings of commercial enterprises, the most notable development occurred in February 2015 with the entry into force of the second-chance mechanisms for personal insolvency. This amendment introduced a new legal process for individuals, consumers, and self-employed professionals, allowing them to resolve their insolvency through debt restructuring agreements or by obtaining the Discharge of Unsatisfied Liabilities (BEPI), meaning the cancellation of bank, financial, personal guarantees, ICO loans, public debt with the Tax Agency, Social Security, among others.
Spain, together with Romania and Bulgaria, was one of the few European Union member states without legal mechanisms to address personal insolvencies. Pressured by EU legislative requirements and motivated by the acquisition of European funds, this significant reform was introduced in 2015. Over nearly ten years, it has undergone various legal, jurisprudential, and interpretative modifications.
With its entry into force, an American-style commercialization of law firms and legal franchises offering digital and remote services without the necessary rigor has occurred. This commercialization has undermined the Second Chance process and generated malpractice that has caused distrust among judges and courts toward debtors. More restrictive interpretative criteria have even been established, such as those published by the Commercial Courts of Barcelona in December 2023, limiting real access to the Second Chance in line with the 2022 reform.
Currently, those who cannot pay their debts and need proper legal advice from a law firm to resolve their insolvency face a dangerous challenge: choosing a lawyer. At GMB Abogados, we consider it essential to warn citizens that this choice is key to the successful development of their process. It is crucial to have personalized legal advice and a firm with a professional, approachable, and human team that ensures the correct management of the Second Chance procedure.