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Asking for a loan to pay for the purchase of a home, car, dental appliance or studies is a common practice. Most families know how to manage their repayment to avoid over-indebtedness, but the Covid-19 crisis has caused many other households to find themselves empty-handed and with a heavy backpack of debts on their backs. As in the 2008 crisis, Thousands of Spaniards have now entered a spiral of red numbers from which they will not be able to get out without help. The shame and fear of being judged for their critical economic situation are barriers that those affected have to overcome in order to access the lifeline of the Second Chance Law, a mechanism with which all debts can be exonerated if they are complied with. a series of requirements.
Why do we go into debt?
But before solving the problem you have to find its root. Luis Miguel Díaz, legal director and bankruptcy mediator at Deudafix, the fastest growing personal insolvency provider in Spain, explains the three most frequent reasons for indebtedness in Spain:
-Changes in personal and economic circumstances: either for work (unemployment), health (illness), personal (divorce) or external reasons (Covid crisis), income varies throughout life and some people decide to go to the bank to apply for a loan and thus be able to face the usual expenses and the installments of loans already acquired. But it is the whiting that bites its tail, how do we pay the loan to cover others?
-Conditions of the loans: on many occasions those affected find interests and / or really abusive conditions of the loans. “Asking for a quick loan to pay another one is not going to help us solve the problem, but rather it is going to complicate it even more,” says Díaz.
-Business losses: in the case of autonomous, Thousands of them have seen how due to different unexpected situations, such as Covid, their business is no longer viable, since financial costs / operating expenses have increased or sales have simply decreased, he clarifies. “Without being able to work, the debt can only grow, so you have to act and stop that situation”, underlines.
How does the Law of Second Chance work?
Individuals and freelancers who are in a critical financial situation can cancel all their debts thanks to the Second Chance Law. This exit will be especially useful for those small entrepreneurs who have had to close their businesses in the last year due to generating debt and not being able to face it. The The main requirement to benefit from this law that came into force in 2015 is to have acted in good faith and try to reach an agreement with creditors to defer the debt. Added to this is the obligation to not have debts that exceed five million euros; not having committed socio-economic crimes or having resorted to the Second Chance Law in the 10 years previous years and not having rejected an offer of employment considered adequate to the capabilities of the debtor during the last four years. Of course, you have to be patient because applicants must wait between 12 and 18 months in Spain.
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