In an economy that can become suffocating for families and the self-employed, the Second Chance Law represents a legal lifeline for those who cannot afford their debts. This law, in force in Spain since 2015 and reformed several times (most recently in 2022), allows bona fide individuals to cancel part or all of their debts. In this article, we analyse how it works, updated to 2025, its requirements and the most relevant new features.
What is the Second Chance Law?
The Second Chance Law (LSO) is a simplified insolvency procedure that allows individuals and the self-employed to cancel their debts if they meet certain requirements. It aims to give insolvent individuals a financial «second chance», allowing them to start afresh without the burden of debt.
Who is it aimed at?
- Individuals (including people on salary, benefits or unemployed).
- Self-employed and self-employed professionals.
It is not intended for companies, although the self-employed can benefit from it in the context of their economic activity.
Updated requirements in 2025
In order to benefit from the Second Chance Law in its reformed version, it is necessary to fulfil the following criteria:
- Being a natural person, whether employed, unemployed or self-employed.
- Being in a situation of current or imminent insolvency, without the capacity to pay.
- Have debts to at least two different creditors.
- Debts must not exceed EUR 5 million.
- Not having been a beneficiary of the LSO in the last 10 years.
- Not having committed socio-economic crimes (against the Treasury, Social Security, assets, etc.) in the last decade.
- Acting in good faith, This means cooperating with the judge and not concealing information or assets.
Phases of the Second Chance Law procedure
1. Court application
An attempt to reach an out-of-court settlement with creditors, as was the case before 2022, is no longer mandatory. The application is submitted directly to the relevant court.
2. Liquidation (if there are assets)
If assets exist, they are liquidated to satisfy part of the debt.
3. Waiver of Unsatisfied Liabilities (BEPI)
It is the judicial cancellation of debts that could not be satisfied from the debtor's assets.
4. Monitoring and maintenance of the exemption
For a period of up to 5 years, the debtor must maintain certain commitments. In case of substantial improvement of his financial situation, the creditors may request a review.
Most relevant developments (2022-2025)
- Faster procedureMany resolutions are obtained in 2 to 4 months.
- Increased automation and simplification of the process.
- Partial waiver of public debtsup to 10,000 euros with the tax authorities and social security can be cancelled.
- Greater security for the debtor against foreclosures and attachments.
What debts can be cancelled?
Debts that are exempted:
- Personal loans
- Credit cards
- Microcredits
- P2p or peer-to-peer lending
Public debts (partly):
- Tax and Social Security (up to 10,000 euros in total, 5,000 euros per entity)
Debts that are not waived:
- Maintenance payments
- Administrative fines
- Indemnities for civil liability
Benefits for the debtor
- Immediate halt to seizures
- Economic and psychological relief
- Recovery of professional activity
- Financial and personal fresh start
Frequently Asked Questions (FAQ)
When was the last reform?
The last substantial reform of the Second Chance Law was implemented within the Bankruptcy Law 16/2022, published on 5 September 2022 and in force since 26 September 2022.
How long does the process take?
3 to 6 months, depending on whether or not there are assets to liquidate.
Can I lose my primary residence?
It depends on whether there is a mortgage and the level of income. In some cases it is possible to keep it.
How many times can LSO be applied for?
Once every 10 years.
Is it published in official gazettes or registers?
Yes, although after 5 years cancellation of annotations can be requested.
Do not doubt that at Martínez Sanz Abogados we will give you the best solution if you contact one of our lawyers. lawyers in Second Chance Law.
