La Ley de Segunda Oportunidad, the Second Chance Law, was introduced in 2015. The purpose of this law was to allow bankrupt businesspeople to cancel their debts, start over and be able to undertake new projects. It was inspired by legal regimes such as that of the US, where there is a culture of encouraging entrepreneurship by minimising the effects of previous failures. Aimed essentially at small businesses owners and the self-employed, ten years on from the law's introduction, it is they who are benefiting the least.
In 2024, there were 1,348 court procedures in the Balearics under the terms of this law. Businesses represented just six per cent of the total; the self-employed eleven per cent. The rest of the cases related to individuals with debts. That only 17% were for business points to the fact that, despite the original spirit of the law, anyone can apply to the courts for relief from debts.
A further factor, said to be an underlying flaw, is that while the law allows for the exoneration of debts with banks and suppliers, limits apply to debts owed to social security and the Tax Agency - 10,000 euros in both cases.
Indebted individuals and families have benefited more than businesses from a reform of the law in 2022 reform. This included, among other things, removing the involvement of public notaries - a high expense in itself. There was also the possibility of refinancing debt payments to avoid losing homes, even though applicants predominantly do not own homes. The number of cases has risen in recent years because of the pandemic and the increase in rents.
Joan Pere Capllonch of the Capllonch Advocats law firm says: "The fact is that the opposite has happened. There are many more workers than business owners benefiting from the law." His firm handles around 40 cases a year. The percentage of businesses is in line with the figures quoted above, which come from the General Council of the Judiciary.
The limits on debt cancellation with the Tax Agency, he adds, have shaped a profile of indebted people "who have become accustomed to living on the fly". "They get used to living with cash, without a euro in their bank accounts. As soon as they receive an income, they immediately withdraw it from the bank so that the Tax Agency doesn't seize it. People are taking out microcredits of 300 or 400 euros simply to pay a month's rent. Many of them don't even know how much they owe."
The law, which didn't distinguish between businesspeople and non-businesspeople, opened a door to everyone that has only widened over time, to the point that attempts are being made to impose limits on everyone. "Judges are becoming increasingly strict so that it's not so easy to invoke the law."
Business representatives are calling for the refinement of aspects of the law considered to be contrary to the interests of businesspeople, starting with the social security and tax ceilings. The president of the PIMEM federation of small and medium-sized businesses, Jordi Mora, argues this is "an unfair, incoherent measure without any possible justification". Capllonch fully agrees. "It is an aberration, because the business owner can settle bank and supplier debts, but not the part of the debt that is often the most significant."
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This is basically encouraging a Gambling style of running a business smell´s of Socialist Ideals basically we can solve any problem with the wave of a wand , this will invoke instability and mistrust in the society and create more disbelief in the Local and National Government these large infrastructure project´s such as those we have seen on the Paso martime which have suffered under the duress of the works have been asking for relief for years surely the government should have seen this coming .
'It was inspired by legal regimes such as that of the US'. Prime example - 6 of Trump's businesses went bankrupt!
This is not the way to encourage people into start-ups (business). Knowing you can walk away from debts will only motivate entrepreneurs to be overly reckless and to take greater risks with their businesses than is sensible. This law should be repealed and owners of failing businesses made responsible for debts they have created while knowingly insolvent.