• The bankruptcy process will allow the exoneration of all debts even if they are not covered with all the assets
  • The floor clauses for vulnerable groups are removed and the moratorium on evictions is extended for two years

The Council of Ministers has approved a Royal Decree Law on the Second Chance Mechanism and Reduction of the Financial Burden and other Social Order Measures that seeks to facilitate the debt reduction of the Spanish economy, while extending protection to those groups most vulnerable by the crisis. This establishes a second opportunity in bankruptcy for bona fide debtors with charges that includes, for the first time, individuals. In addition, the group protected by the Code of Good Practice is extended to those who are excluded from the floor clauses of mortgages and the suspension of evictions that expired next May is extended for two more years.

The objective of the second opportunity It is to reconcile the interests of creditors and debtors through procedures with guarantees that will allow them to face the payment of debts in an orderly manner. The Government had already taken measures to reduce corporate debt and facilitate the survival of those that were viable. With this Royal Decree-Law, these measures are reinforced and extended to include individuals and to provide greater facilities to smaller companies. Thus, a permanent framework of personal insolvency is developed, in line with the recommendations of the main international organizations and the European Union.

The norm approved today expands and makes the Extrajudicial Payment Agreements more flexible to improve their effectiveness and facilitate the restructuring of debts in an agile and simple way. Individuals may also access these agreements, in addition to employers and companies. Thus, it becomes a more effective instrument and achieves a more homogeneous and coherent debt restructuring framework. The agreements reached are also allowed to be extended to the creditors with real guarantee when the anticipated majorities concur.

In turn, the figure of the mediator is strengthened and made more flexible, whose job is to promote negotiations to facilitate debt restructuring agreements between the parties. The bankruptcy mediator will be appointed by a notary or registrar. In the case of companies, mediation functions may be carried out by the Official Chambers of Commerce, while the notary may have this role for natural persons.

Specially simplified procedural rules are established for individuals in matters related to the appointment and summons of creditors, and notary and registry fees are significantly reduced. Finally, during the negotiation period, the executions of assets necessary for the activity, including the habitual residence, will be suspended.

For individuals who are debtors, a new, more flexible and effective debt exemption system is established that will be applied after the conclusion of a bankruptcy or liquidation bankruptcy process that would consist of the following steps. The current possibility of exoneration of debts is maintained at the end of the liquidation provided that the privileged credits are paid, against the estate and, if an out-of-court payment agreement has not been attempted, 25% of the ordinary credits as currently foreseen

Alternatively and as a novelty, when the previous credits have not been satisfied and as long as the debtor agrees to submit to a payment plan for the following 5 years for the payment of the debts not exonerated (against the estate and those who enjoy general privilege ), the debtor may be exonerated from the rest of his credits, except public and maintenance. For the definitive liberation of the debts, the debtor will have to face in that period the debts not exonerated or make a substantial effort to their satisfaction. In the case of creditors with a real guarantee, the part that may be exonerated will be that which would not have been covered in the execution of the guarantee. The exoneration of debts may be revoked within the aforementioned period of five years at the request of creditors when it is proven that income or assets have been concealed or the debtor achieved a substantial improvement in his situation.

Likewise, income that may become apparent as a result of deductions and payments in payment of debts, established in an agreement, in an out-of-court payment agreement or as a consequence of the exoneration of debts, is declared exempt from personal income tax.

The third block of measures refers to the Code of Good Practice (CBP) for mortgage debtors that will be accessible to a broader set of beneficiaries. Specifically, the criteria that give access to the CBP are relaxed, for which the annual family income limit is increased up to three times the IPREM (Public Indicator of Multiple Income). Until now it was calculated for 12 payments and now it will be done for 14, which goes from 19,170.39 euros to 22,365.42 euros in 2015. The assumptions of special vulnerability are also expanded, to include those over 60 years of age.

Likewise, the purchase price limit of the properties that may benefit from the CBP is raised. This may exceed by 20% the average price shown by the index prepared by the Ministry of Development with a limit of 300,000 euros (250,000 euros for the payment in payment), before 250,000 euros. Finally, the measures to which CBP beneficiaries can benefit are expanded. Specifically, the final inapplication of the floor clauses, when any, is established for those debtors located at the new threshold of the Code of Good Practice.

Lastly, the period for suspending launches on the usual homes of particularly vulnerable groups extends to 2017, which is extended in terms similar to those provided for in the Code of Good Practice.

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