News in bankruptcy law and the second chance mechanism with the Create and Grow Law

The application of the Create and Grow Law brings consequences, in part very positive for the self-employed. Since its entry into force, those self-employed workers who find themselves in a situation of insolvency and enter bankruptcy proceedings they will not be forced to lose their home or your business, in the event that they cannot meet their payment obligations.

The new regulations have established several innovations both in the Concursal law as in the mechanism of second opportunity. One of them is the expansion of exonerable liabilities, that is, the assets of the self-employed worker that no judge can put up for sale so that creditors can collect. Until now, a self-employed person was responsible for his debts with all his assets, present and future.

This, according to the normative text, will not only allow the debtor, in this case the self-employed, “Keep your habitual residence”but you also won’t have to lose “your business assets” when entering bankruptcy. This is one of the most relevant changes for self-employed workers included in this reform since, if they are a natural person, they have unlimited liability and in many cases they could lose their home and business if they were drowned in debt. and they had to resort to bankruptcy.

This reform of the second chance procedure, aimed at both natural persons and the self-employed in bankruptcy, has as its objective that the beneficiaries can continue with their activity and enable a truly effective second chance.

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Their main measures are:

  • Possibility of exoneration without prior liquidation of the debtor’s assets and with a payment plan to creditors. The debtor would be allowed to maintain his habitual residence (under certain conditions) and if he were self-employed, continue with his activity, as mentioned above.
  • Certain restrictions on accessing the exemptions are removed or relaxed.
  • The bankruptcy procedure is reformed to do so more agile and efficient: facilities to approve an agreement when the company is viable and improvements for the sale of productive units or their liquidation.
  • Incentives are created for the bankruptcy administrator conditioned on the speed and agility of the procedure, with the aim of reducing its duration.

To date, there was only three situations in which the debtor could keep his home through competition. The first was that the sale of the house did not imply a sufficient economic benefit, that is, that after selling it, the money obtained did not allow paying the outstanding debts. Another assumption could be that the capital pending amortization of the mortgage was greater than the market value, that is, that the sale would not settle the outstanding debt. And, finally, that the sale of the house meant a worsening of the financial situation, for example, because works had to be done or a certificate had to be issued and it did not compensate for the transfer. All this, moreover, had to be determined by a judge.

The Law Creates and Grows also determines other in-depth changes that affect the Bankruptcy Law. Gpasoc has established the following new features:

The drive for early restructuring

Its objective is to make it easier for viable debtor companies to obtain an effective instrument to avoid or emerge from insolvency.

They are aimed at companies with financial difficulties and will allow an earlier restructuring and with greater chances of success, at the moment in which signs of probability of insolvency are detected.

In addition, it will contribute to decongesting the commercial courts, freeing up resources and allowing greater efficiency in the contest.

Special treatment for SMEs and micro-SMEs

Both SMEs and micro-SMEs will receive a different treatment. They will be applied the regime generatesl, with some peculiarities, to simplify procedures and reduce costs.

In this way, a specific procedure is introduced, promoting telematic processes without having to resort to a notary or auditor, creating a settlement platform that will reduce time and costs and increase transparency.

Advantages of the new Bankruptcy Law

The Government has highlighted that the main advantages of the new Bankruptcy Law are:

  • Facilitate that the debtor in good faith can cancel his debt.
  • Reduce deadlines to achieve the definitive exoneration (second opportunity).
  • Possibility to choose the immediate exoneration (through liquidation).
  • Possibility of opting for a payment plan or provisional exemption.
  • An area of ​​legislative competence is created between the different member states.

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