• The bankruptcy process will allow the exemption of all debts even if they are not covered with all the assets
  • The ground clauses for vulnerable groups are eliminated and the moratorium for evictions is extended by two years

The Council of Ministers has approved a Royal Decree Law on the Second Opportunity Mechanism and Reduction of the Financial Burden and other Social Order Measures that seeks to facilitate the indebtedness of the Spanish economy, while extending protection to those most vulnerable groups by the crisis. It thus establishes a second opportunity in bankruptcy for debtors in good faith with charges that include, for the first time, natural persons. In addition, the group protected by the Code of Good Practice is extended to those who are excluded from the ground clauses of mortgages and the suspension of evictions that expired next May is extended for two more years.

The objective of the second opportunity is to reconcile interests of creditors and debtors through procedures with guarantees that will allow to face the payment of debts in an orderly manner. The Government had already taken steps to reduce corporate over-indebtedness 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 for smaller companies. A permanent framework of personal insolvency is thus developed, in line with the recommendations of the main international organizations and the European Union.

The norm approved today extends and flexibilizes the Extrajudicial Payment Agreements to improve their efficiency and facilitate the restructuring of debts in an agile and simple way. Individuals may also access these agreements, in addition to businessmen and companies. It thus becomes a more effective instrument and a more homogeneous and coherent debt restructuring framework is achieved. The agreements reached are also allowed to be extended to the creditors with real guarantee when the planned majorities concur.

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

Especially simplified procedural rules are established for individuals in matters related to the appointment and appointment of creditors, and the notarial and registration fees are significantly reduced. Finally, during the negotiation period the executions of assets necessary for the activity, including habitual housing, will be suspended.

For debtors, natural persons, a new system of more flexible and effective debt exemption is established, which will be applied after the conclusion of a contest for liquidation or for insufficiency of mass that would consist of the following steps. The current possibility of debt exemption at the conclusion of the settlement is maintained provided that the privileged loans are paid against the mass and, if an extrajudicial payment agreement has not been attempted, 25% of the ordinary credits as currently provided

Alternatively and as a novelty, when the previous credits have not been satisfied and provided that the debtor agrees to submit to a payment plan during the following 5 years for the payment of debts not exempted (against the mass and those who enjoy general privilege ), the debtor may be exempted from the rest of his credits, except public and food. For the definitive release of the debts, the debtor must face non-exempt debts during that period or make a substantial effort to satisfy them. In the case of creditors with collateral, the part that may be exempted will be the one that would not have been covered in the execution of the guarantee. Debt exemption may be revoked within the aforementioned period of five years at the request of the creditors when it is proven that income or assets have been hidden or the debtor achieved a substantial improvement in their situation.

Likewise, income that could be revealed as a result of debts and payments in payment of debts, established in an agreement, in an out-of-court payment arrangement or as a result of debt exemption 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 wider 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 Multiple Income Indicator). Until now it was calculated for 12 payments and now it will be made for 14, which goes from 19,170.39 euros to 22,365.42 euros in 2015. The cases of special vulnerability are also extended, to include those over 60 years.

Likewise, the price limit for the acquisition of real estate that may benefit from the CBP is raised. This may exceed by 20% the average price thrown by the index prepared by the Ministry of Development with a limit of 300,000 euros (250,000 euros for the payment date), before 250,000 euros. Finally, the measures to which CBP beneficiaries can benefit are extended. Specifically, the final non-application of the ground clauses is established, when any, for those debtors located in the new threshold of the Code of Good Practice.

Finally, the period of suspension of launches on habitual dwellings of especially vulnerable groups is extended until 2017, which are extended in terms similar to those provided for in the Code of Good Practice.

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