Royal Decree-Law 1/2015 of February 27, introduced a series of modifications to the Bankruptcy Law, and in the case of Non-business individuals (commonly called consumers), a notarial procedure to reach an out-of-court payment agreement, ultimately aimed at achieving the release of debts.
This Royal Decree later became the Law 25/2015, of July 28, a second chance mechanism, reduction of the financial burden and other social measures, which entered into force on 30 July 2015, although for its full effectiveness we had to wait until On December 17, 2015, date on which the standard form for the application for the procedure to reach an out-of-court payment agreement was approved.
We are about to complete a year since we have had this procedure. Personally, I have processed various files and my experience in them is what I intend to convey in these lines, in contrast to the uncertainties that I had when I published this other one. entrance.
The legal basis for this debt relief procedure comes in Article 178 bis of the Bankruptcy Law tells us:
“The natural person debtor may obtain the benefit of the exoneration of unsatisfied liabilities under the terms established in this article, once the bankruptcy has concluded due to liquidation or due to insufficient assets.”
This article constitutes an exception to article 1911 of the Civil Code, in force since 1889, which includes the so-called principle of universal patrimonial responsibility of the debtor, and therefore the debtor is liable for his debts with all his present and future assets.
In order for the judge to declare the discharge of liabilities, it is necessary that bankruptcy proceedings be carried out, and as a prerequisite that an out-of-court payment agreement has been concluded or at least attempted, which can be carried out before a Notary (article 178.3º bis).
This means that the procedure is twofold, it has a NOTARIAL part and a JUDICIAL part, which can be systematized in the following points:
1.- An out-of-court payment agreement must be attempted, through the procedure of article 242 bis of the Bankruptcy Law, that is, through a mediator, who may be the Notary himself, only in the case that the debtor is a natural person who is not a businessman.
2.- The agreement must be approved by qualified majorities, depending on its content, but without reaching unanimity.
3.- If an agreement is not reached, it will be the bankruptcy mediator (in this case the Notary) who will directly request the bankruptcy from the judge. This is a so-called consecutive bankruptcy regulated by article 242 of the Bankruptcy Law.
4.- The judge will proceed to appoint a bankruptcy administrator, whose duties are to liquidate the existing assets (which will hardly ever exist) and pay the credits against the estate (those that have originated the bankruptcy) and once the liquidation is concluded, he will present to the bankruptcy judge a final report justifying the operations carried out, and in view of this report the debtor may request the discharge of the unsatisfied liabilities before the bankruptcy judge.
5.- It is possible, as an exception, that in view of the report presented by the bankruptcy mediator, the judge in the same bankruptcy declaration order, declares its termination, if it is evident that there are not enough assets to pay the creditors (article 176.3 LC).
The procedure as we have explained it to you seems quite complex, as is generally the case with all bankruptcy legislation, but if we take into account that the notarial procedure is only applicable in the case of individuals who are not business owners, and that when they resort to this procedure it is because they no longer have assets to sell, or they have already had their assets seized or executed, and because they only have income through payrolls and pensions, the real job of the mediator-notary, and then of the administrator, is to propose a payment plan in accordance with the debtor's real income, which will involve the reduction of a high percentage of the debt.
a.- THE NOTARIAL FILE (article 242 bis Bankruptcy Law)
1.- It begins with a request to a Notary at the debtor's domicile.
The Notary will record this request by the debtor through a document, for which they must present a standardized form which includes the assets and liabilities available, a criminal record certificate, and must state in the minutes that the applicant meets the other requirements to access the procedure.
It is not necessary to act through a lawyer or attorney, but it is highly advisable to have professional advice through a lawyer throughout the entire procedure.
2.- The appointment of the Mediator.
The first action that the Notary must take is to appoint a bankruptcy mediator. The law seems to give preference to the notary himself, since he will be the one who will promote the negotiations between the debtor and his creditors, and may appoint, if he deems it appropriate or if the debtor so requests, a bankruptcy mediator.
Personally, I have acted as a mediator on several occasions, and many times this is what the person who comes to this procedure really wants.
Therefore, when I speak of a mediator below, I will refer to the mediator-notary.
3.- Communications.
Once the mediator has accepted the position, the Notary must communicate the opening of the file to the court competent to declare bankruptcy, to the property registries, to the civil registry, to the public bankruptcy registry, to the State Agency of Tax Administration and to the General Treasury of Social Security.
Except for the civil registry and the courts, all these communications can be done electronically.
Today, jurisdiction falls to the courts of first instance of the debtor's domicile, which in my opinion is one of the biggest errors of the law.
Previously, this jurisdiction was the responsibility of the commercial courts, which facilitated, at least in small cities, fluid communication between the Notary and the Court.
4.- The functions of the Mediator.
The initial actions that the mediator must take, for which he has a period of 10 days from his acceptance, are:
a) Check the data and documentation provided by the debtor;
b) And check the existence and amount of the credits.
It is this last task that can be the most complex, because in the case of non-business individuals there is no obligation to keep accounts, and therefore beyond the statements made by the debtor, or some generic consultation with the land registry or the Property Registry, it is difficult to know if there may be other assets and/or debts other than those stated.
Although the law does not state it, it may be advisable, as bankruptcy administrators must do, to send creditors a notification of the opening of the file, so that they can state whether there is an error or omission in what the debtor has declared.
In any case, I do not believe that the lack of accreditation of all these facts is a particularly serious issue, since in the event of inaccuracy, it could be resolved with the responses made by the creditors; and if it derives from their omission, the omitted creditors would not be bound by the possible agreement, nor by the judicial resolution of exoneration of the liability, since the requirement of the debtor's good faith would be missing, so that the bankruptcy can be declared as fortuitous.
These uncertainties arise in all bankruptcy proceedings, and the law tries to avoid them as far as possible by considering the bankruptcy as culpable, in the event that an inaccuracy has been committed in any of the documents accompanying the declaration of bankruptcy (article 164 LC) and that could lead to the liability of the directors of commercial companies.
In the case of bankruptcy of individuals, there is no such risk, since all assets are already liable, so it does not make much sense to omit debts, and when this extreme is reached, the assets are already mortgaged or seized.
5.- The meeting with creditors. Form and content
Once the above actions have been carried out, the mediator will call the debtor and creditors to a meeting one month in advance and will send them a proposal for an agreement fifteen days in advance of the meeting.
I personally make the call, simultaneously sending the proposed agreement, and indicating that they may make any observations regarding the existence and amount of the credits.
The call for the meeting between the debtor and the creditors is made, in principle, through a notary or by any means of communication, individual and written, that ensures receipt.
However, if the electronic address of the creditors is known because it has been provided by the debtor or facilitated by them to the bankruptcy mediator in the terms indicated in letter c) of article 235.2, the communication must be made to the aforementioned electronic address.
For reasons of time and cost, electronic notifications are preferable, even though they may lack certain guarantees. Through trial and error, I have compiled a database of addresses of professional creditors, banks and financial institutions, which are repeated in all the files, and so far there have been no problems.
The payment proposal is made by the mediator, with certain limits, since the waiting periods cannot exceed ten years. It may seem something alien to the notarial function, but it is not particularly complicated, since it is limited to determining the surplus amount after attending to the ordinary needs of the debtor, and adjusting that surplus (if there is one) to a certain period, which will entail the reduction of the rest of the debt and the deferral of what has not been forgiven, within the maximum allowed, as happens in all bankruptcy proceedings.
The creditors are very encouraged to respond, even if they do not accept the payment proposal, as provided in article 237 LC, since their credits could be classified as subordinated in the subsequent contest.
6.- The meeting.
The content of the agreement is not set by law, and only establishes a limit on the waiting periods that cannot be agreed upon. for a period not exceeding ten years, establishing on the other hand a majority regime, different according to the content of the agreement, which ranges between 60% and 85%
If there is an agreement, a public deed is granted to document it and if there is not, the judicial phase would begin.
B.- THE JUDICIAL PART. THE CONSECUTIVE COMPETITION BY THE NOTARY
If within two months from the communication to the court of the opening of negotiations it is not possible for the mediator-notary to reach an agreement, a reasoned report of his conclusions must be prepared and sent to the Court requesting consecutive bankruptcy, which is processed through the channels of article 242 of the Bankruptcy Law and which directly opens the liquidation phase.
Although in the case of companies, the lack of an out-of-court agreement does not prevent an attempt to reach an agreement again within the bankruptcy procedure (article 242.2.1 LC), in the case of non-business individuals this option does not exist, so that once bankruptcy is requested, the opening of the liquidation phase must be agreed upon.
Once the bankruptcy has been requested, and according to procedural doctrine, under the protection of article 15 LC, the judge will issue an order declaring bankruptcy on the first business day following, and will proceed to appoint a bankruptcy administrator and proceed to classify the bankruptcy.
Once the liquidation has been concluded, the bankruptcy administrator will present the accounts, which will be made available to the creditors so that they can make allegations for a period of 15 days, and, within the same period, the bankrupt debtors may request the discharge of the unsatisfied liabilities, provided that the bankruptcy has been classified as fortuitous, the debtor has not been convicted of crimes against property and an out-of-court settlement has been requested (article 178 bis LC).
