The Second Chance Law is the legal mechanism that allows a person to start over when they are insolvent, through the insolvency proceedings of a natural person and the discharge of unsatisfied liabilities (EPI). The regulation allows you to request this exemption if you are an individual, whether or not you are self-employed/business owner, provided you meet the requirements and act in good faith.
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The discharge (EPI) is a court ruling within insolvency proceedings that may allow you to be released from the portion of debt that is dischargeable, under specific rules and exclusions. The TRLC regulates this discharge and provides two options (payment plan or liquidation).
In addition, the insolvency reform (Law 16/2022) established a system under which, in certain cases, you may request the discharge without first liquidating all your assets, through a payment plan.
The law provides two routes:
1) Debt discharge with a payment plan (without prior liquidation)
2) Debt discharge with liquidation
When it usually applies: when there is no real capacity for a payment plan or when it is more efficient to close the procedure as quickly as possible.
In plain terms: there is no universal “best option”. There is an option that fits you and your real situation better (income, assets, type of debt, and risk).
The general rule is that debt discharge applies to outstanding debts, except for the exclusions set out by law.
Debts that cannot be discharged (key examples)
Among others, the TRLC excludes:
And what about tax and Social Security debts?
The law provides for a partial discharge of debts managed by the tax authority (AEAT) and Social Security (TGSS), subject to quantitative limits (up to €10,000, under the legal framework).
It is also important to know that the Supreme Court has issued rulings establishing criteria on limitations and exclusions of discharge (February 2026), which makes it even more important to properly assess each case and document it transparently.
Yes, the TRLC allows individuals to request debt discharge whether or not they are entrepreneurs.
It depends. With a payment plan, there may be a framework that allows your main residence not to be sold in certain cases, which can affect the duration of the plan (it may extend to 5 years).
Generally 3 years; it can be 5 years in cases provided for by law.
The law sets out specific exceptions (maintenance obligations, certain civil liabilities, fines/penalties, etc.).
There is a partial discharge within the legal limits for the Tax Agency (AEAT) and Social Security (TGSS).
Exclusion grounds linked to criminal convictions, very serious penalties, liability claims, lack of cooperation, false information, etc.
If you are over-indebted, the worst thing you can do is move forward blindly. The best approach is a clear plan and a properly structured legal process.
