The economic crisis derived from the pandemic undoubtedly affects the increase in individuals requesting bankruptcy. Thus, last year was the first in which competitions for individuals exceeded those for legal persons (companies), which until 2019 had always been more numerous, a trend that is confirmed and even increases in the first months of 2021.
One of the key factors for indebted individuals to go to court more so that their bankruptcy situation is recognized, is the greater knowledge of the mechanism of the “second opportunity”. By this name is known what is technically called the unsatisfied liability benefit (BEPI), which, in practice, it includes the idea that the figure pursues: to allow individuals with a large debt burden to start over, without the burden of previous obligations.
It is a practice so recurrent in recent times that the dissemination of successful experiences of this figure is even foreseen, through a format reality television program that Bertín Osborne will present.
The first law that introduced this possibility in our country dates from 2013 and was perfected in 2015. Until that date, even though they took advantage of insolvency proceedings, individuals were still responsible for all unpaid debts, without being able to make a clean slate . The BEPI mechanism was created to support entrepreneurs of failed projects, but it can be used by both individuals and non-business owners. And this because, as the 2015 legislator indicated, “experience has shown that when there are no second chance mechanisms there are clear disincentives to undertake new activities and even to remain in the regular circuit of the economy”, so that these mechanisms They are “conducive to a business culture that will always benefit employment.” The BEPI or debt forgiveness is processed through the courts and requires compliance with certain requirements and procedural steps. First of all, it is required that it be bona fide debtorAlthough the legislator is very permissive in this regard, and only considers that whoever has committed certain economic crimes is not. In addition, you need a payment commitment by the debtor, which implies the liquidation of the patrimony of your property, necessary to pay off your debts with what is obtained from that sale.
However, the liquidation of the assets does not always affect the habitual residence, which, on occasions, may remain in the hands of the debtor owner. The consolidated text of the bankruptcy law (TRLC) does not mention this point, which does include article 23.3. b) of the restructuring directive by foreseeing the possibility that “the main residence of the insolvent employer is not executed”. This European standard must be incorporated into Spanish law before next July 17, although the date could be delayed if the one-year extension requested by Spain to make it effective is met.
Despite the current legal vacuum, the judges of Barcelona, as in many other aspects of bankruptcy practice, have also been pioneers in the application of the second chance and in the definition of the situations in which the bankrupt can continue to be the owner of his living place. They addressed the issue in 2016 at a seminar in which they set the criteria for applying the BEPI (available here) and in which they determined, with respect to the bankrupt’s home, the possibility of not auctioning it when the debtor is up to date with the mortgage payments, if the value of the guarantee is higher than the market value of the property.
The application of this criterion has been reflected in numerous court decisions, the essence of which is reflected in a recent Order of the Provincial Court of Barcelona which explains that “the cases in which the habitual home has been excluded from the liquidation plan” have occurred when “the mortgage loan was paid on time” and “the possible sale of the home did not report any benefit to the rest of the creditors because there was a reasonable forecast of reaching a higher price ”than the mortgage.
This approach has been accepted by other courts in the country and has even gone further in some cases in which the home owned by the bankrupt was not usual, but had been rented to a third party, as resolved in a resolution issued by the JCommercial court number 1 in Oviedo in December 2019. The magistrate considered that the rented home could get rid of the auction because the mortgage on the rented apartment was up to date with payment and the value of the property was “less than the mortgage debt.” The judge understood that selling the property did not benefit anyone: “Neither the debtor, who obviously loses the asset” nor the “creditor bank, which aspires to maintain the loan contract; nor, finally, ordinary or subordinate creditors, who cannot expect a surplus ”.
Property separation problems
In any case, the typical case in which the home is not auctioned implies that it either belongs entirely to the debtor, or to both spouses in a matrimonial property regime of community property or communication of assets. On the contrary, when there is separation of property and the mortgage has not been paid, it will not be possible to avoid the liquidation of the property. What will actually be sold will be half of the mortgaged home, since the mortgage cannot be divided. In these cases, the resolution of the Barcelona Court cited above states that “the foreseeable realization value of that undivided half will vary depending on whether it can be sold together with the other half, allowing the cancellation of the charges, or if it is sold as independent mode, without cancellation of possible real loads. “