According to the College of Registrars, bankruptcy proceedings have continued to increase in 2024 in Spain. In the first quarter there were 1,117, and the majority were self-employed. Economists say that many declare themselves bankrupt to benefit from the Second Chance Law.
In 2024, the number of self-employed individuals who access bankruptcy proceedings to qualify for the Second Chance Law continues to increase. The basic requirement to be able to access the protection is to declare yourself insolvent and have filed a procedure. Only then can judges free self-employed workers from their debts.
The figures published by different organisations and entities attest to this increase. According to the College of Registrars, in the first three months of 2024 the number of businesses with difficulties that entered bankruptcy proceedings grew by 9.3% to reach 1,117 procedures.
The figure would be even larger if the latest data from the consulting firm Informa D&B are taken into account. According to this company, the number of insolvencies would have been much higher: in the first quarter a total of 1,850 procedures would have been declared in the businesses.
In both cases, the trend is clear: there are more and more bankruptcy proceedings. And most of them are self-employed, since more than 80% of the procedures have been initiated by natural persons. According to Alberto Velasco, technical secretary of the Registry of Forensic Economists (REFOR) of the General Council of Economists (CGE), “the increase in competitions that has been observed in the last year is mostly due to self-employed workers, although the number of companies is also growing who request this procedure due to the effects of the economic situation that we are still going through”.
But as far as self-employed individuals are concerned, the majority of bankruptcy proceedings are “initiated in order to access the Second Chance Law”. Since the start of the bankruptcy proceedings is also a requirement for the exoneration to be initiated,” explains the economist.
The figures from the college of registrars show that in the fourth quarter of 2023 the number of bankrupt debtors stands at 5,783. By type of contest, 5,649 are voluntary (46% more than in the third quarter), 101 consecutive ones (38.4% less), and 33 necessary (65% more than in the third quarter).
In 2023, 5,783 insolvencies were declared, and, of them, 3,696 were natural persons. This is more than 65% of the total procedures. And, although there is no difference between self-employed individuals and other individuals, experts say that the majority are self-employed workers who need access to the Second Chance. “It is a measure that was not known before and now has a lot of demand,” said Alberto Velasco.
Also, although to a lesser extent, the competitions may be due to the “general economic situation” and the “consequences of the war crisis”, since the costs of electricity, gas and in general inflation result in many debts to the business.
As the experts explain, the most important thing to keep in mind if a self-employed person needs to access the Second Chance is that this mechanism is inseparable from bankruptcy proceedings. That is, without having initiated a procedure, a self-employed worker cannot obtain a debt relief, neither with the Administration nor with another creditor.
This contest allows you to certify the insolvency of the business, which will be necessary to request the start of the second chance procedure. Therefore, this would be the first step to access public debt exoneration.
In addition, there are other conditions, such as being a “debtor in good faith”, filling out a report to demonstrate insolvency and presenting it to the courts.
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