When people think about bankruptcy proceedings, the image that often comes to mind is a large company drowning in debt, with processes that stretch for years and sometimes end in liquidation. Since the Second Chance Law was enacted in 2015, however, more individuals have begun to use this mechanism to clear their debts. The trend has accelerated recently, and for the first time, natural persons who are not business owners led most of the filings in Alicante courts.
This upward trajectory is expected to continue after the latest bankruptcy law reforms took effect last autumn, making the process simpler and deadlines shorter.
The numbers are telling. According to data from the General Council of the Judiciary, in 2022 creditors filed 1,025 insolvency petitions in the province, a 35 percent increase from the previous year and the highest figure in the entire historical series. That translates to nearly three bankruptcy filings per day.
Yet a closer look shows that, despite uncertainties and rising costs, filings by companies remained relatively stable, tallying 306 procedures versus 308 the prior year. There has, however, been a notable rise in bankruptcies among self-employed individuals, rising to 148 from 128 in 2021. The most significant surge occurred in filings by private individuals, adding 571 cases, a jump of 325, or 75 percent, from the year before.
Behind the rise in personal bankruptcies, professionals point to several factors. More information about the law and the likelihood of becoming debt-free has become available. It was once unthinkable that people would bear the stigma of default simply because they could not meet payments. The concept of discharge from unfulfilled liability, a key innovation of the Second Chance Law, is shaping today’s landscape.
Economic conditions also play a role. Many people were affected by the pandemic, and numerous self-employed individuals failed to revive their businesses, notes the head of the Bankruptcy Law Department at the Alicante Bar Association. As a result, most cases reaching the courts involve non-mass insolvencies, meaning the applicant has no assets to dispose of.
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Acknowledging the shift, Antonio Galve, legal director of Repara tu Deuda, an increasingly prominent specialized firm, explains that many people lost income as ERTE schemes ended, some faced prolonged work closures, and others faced difficulties in securing bank financing to survive. Those who cannot pay immediately are among the most common profiles seen by the firms working in this field.
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Galve also highlights the government moratorium that ended last July, which previously exempted debtors from declaring bankruptcy. Its conclusion contributed to a wave of new cases, while changes to the Bankruptcy Law encourage more debtors to seek relief by simplifying procedures, eliminating the obligation to pursue mediation with creditors first or appointing a bankruptcy administrator unless a creditor requests it.
Credit lines from the ICO are expected to be repaid eventually, according to Luis Fernando Alonso Saura, head of Bankruptcy Law at the Alicante Bar Association. He predicts more company bankruptcies in the coming months, driven by the expiration of ICO loans intended to support liquidity and the ongoing treasury pressures from reduced activity and higher costs.