Second Chance Law in Spain 2025: Who Can Apply and Cancel Debts

Spain's Second Chance Law (Law 25/2015, reformed by Law 16/2022) allows individuals and self-employed workers drowning in unpayable debts to get a genuine fresh financial start through the formal cancellation of their debts — including, under the new reform, debts with the Tax Authority and Social Security.

Who Can Apply?

Any individual (private citizen or self-employed) who meets three criteria: (1) they are insolvent or imminently insolvent; (2) they acted in good faith (no fraud, no deliberate asset hiding); (3) they have not obtained the debt exemption (BEPI) in the last 5 years. Companies and corporations cannot use this mechanism — they must file traditional insolvency proceedings.

What Debts Are Cancelled?

• Credit card and personal loans
• Residual mortgage debt (the amount not covered by the property after auction)
• Business debts including to suppliers (for self-employed)
• Debts to the Tax Authority and Social Security (limited, new since 2022)
• Personal guarantees given on business debts

The Process Step by Step

The process begins with an out-of-court mediation attempt, mandatory before judicial proceedings. If this fails, a consecutive insolvency proceeding is opened. Once assets are liquidated (if any), the debtor applies for the BEPI — the key document that results in debt cancellation. The judge then grants or denies the exemption based on good faith criteria.