The Second Chance Act: what the self-employed and businesses need to know in 2026
The Second Chance Law has established itself as a key tool enabling self-employed individuals and over-indebted private individuals to write off debts they are unable to meet and restart their business activities. It is, however, important to have a thorough understanding of its requirements and the latest court rulings, as the details make all the difference.
What it is and who it protects
The second chance mechanism allows natural persons — both private individuals and the self-employed — to obtain discharge from unpaid liabilities, that is, the cancellation of debts they are unable to pay following proceedings before the Commercial Court. Commercial companies (SL, SA) are excluded from this route and must resort to ordinary insolvency proceedings.
The 2022 reform of the Insolvency Act significantly simplified the process: it abolished the preliminary phase of insolvency mediation, channelled the entire procedure through the courts and streamlined the processing of applications for discharge, reducing both time and costs.
Key points to bear in mind
- Public debts: debt relief for debts owed to the tax authorities and the social security system is capped at a maximum amount per body; any amount exceeding this limit must be included in a repayment plan.
- Two possible routes: debt relief through liquidation of assets or debt relief through a repayment plan, which in certain cases allows the debtor to retain their main residence. Choosing one or the other is a strategic decision.
- Debt registers: following exoneration, it is the court’s responsibility to request, of its own accord, the removal of the debtor’s details from the debt registers.
- Duration: following the reform, the procedure is now processed more efficiently by the Commercial Court.
A very important recent clarification
Judicial practice has introduced a significant caveat: debts that are not expressly disclosed during the proceedings may not be automatically written off. This requires the debtor to identify and declare all their liabilities from the outset, a task that should be prepared thoroughly to avoid any surprises later on.
For this reason, before submitting any documents, a preliminary feasibility analysis is essential: checking whether the requirements are met, drawing up a complete and accurate inventory of liabilities, and deciding which of the two routes is most favourable in each specific case.
How can we help you?
At SF Abogados, we support companies and the self-employed in preventing and managing these situations. If you need advice on this matter, our team is at your disposal.
Note: this article is for information purposes only and does not constitute legal advice. The legislation referred to may be subject to further regulations and changes; please check that it is still in force before making any decisions.
