The courts in Alicante reported the highest quarterly volume of bankruptcy proceedings in recent memory, yet experts say the main driver behind this surge may not be the broader economy alone. Rather, it is a response to changes introduced by the new law that came into effect on September 26, strengthening what is called express competitions. These adjustments have pushed many small business owners and individuals to pause and reconsider their strategies.
This perspective comes from specialists consulted after the latest figures from the General Assembly of the Judiciary, which highlighted unusual patterns in the data.
Specifically, between July and September, Alicante state courts registered 283 new bankruptcy cases, a jump of 92 percent from the same period a year earlier, and a new record for the province. Unlike prior quarters, the most growth occurred in special competitions, as the second chance law becomes better known, with many filings now originating in the commercial courts. Enterprises and freelancers accounted for the bulk of these cases, with 208 filed in 2021 compared with 75 on similar dates last year. For individuals with no business activity, numbers rose to 75 from 68 the previous year.
A business in liquidation. German Knight
Experts such as Pedro Algarra and Francisco Nieto from Galsán Consultores point out that a significant share of the cases filed this summer involved corporations or small borrowers with few assets to manage debt. This trend is common among small firms located in rental properties or similar setups.
To date, prior legislation allowed such debtors to launch a claim and simultaneously wind up the competition through express procedures. The new law, which took effect on September 26, eliminates this option and requires a 15-day period before any creditor can petition for the appointment of a manager. It also alters the normal course of the process, a change that debtors argue makes the situation more complicated and could lead to undesirable outcomes for those tied to the business operations, according to Sebastian Crespo from the Devesa & Calvo firm.
Alicante economists suggest the new bankruptcy law will help more firms survive in the long run
This shift has freed many small companies and self-employed individuals from debt, with some considering court action as a viable next step even before the legislative changes took effect.
Change of mindset
Yet experts agree the rise in filings reflects more than just a push to beat the new rules. As many business owners and individuals who once protected personal assets by separating them from business debts begin to rethink their options, the decision to seek relief is increasingly seen as a practical choice rather than a last resort. The sense of fear surrounding bankruptcy has faded for many, and a new mentality has taken hold. Those who once safeguarded personal assets while watching the company falter may now find themselves in a different situation, sometimes still bearing the consequences of past failures.
Rising energy costs are another major factor. Crespo notes that businesses of all types have intensified efforts in response to energy bills and supply pressures, which in turn has driven more bankruptcy filings.
More options for protecting living spaces
The new bankruptcy framework makes it easier for debtors to shield their habitual residences, adding another incentive to consider the second chance option. Previously, individuals faced relentless debt burdens, and only corporations could pursue formal debt relief. Now, individuals may file for bankruptcy to settle debts while keeping their homes from forced sale, a potential lifeline in the current climate.
The law also broadens the path to liquidation and debt release. It allows a debtor to begin mediation and negotiates a repayment plan with creditors, while offering protection from immediate creditor objections. Crespo notes that his clients have already prepared many of these cases in anticipation of the liquidity pressures caused by energy costs and ongoing supply constraints.
Another trend is a rise in private bankruptcies, as the law simplifies access to liability exemption systems. Previously, debtors needed to demonstrate good faith and present a viable plan that creditors would reject; now, filing for bankruptcy and seeking liquidation and release can be pursued directly without the former preliminary steps.
End of the moratorium
Alongside the legislative changes, the end of the pandemic-era moratorium is another reason for more bankruptcies. The moratorium had prevented creditors from filing for bankruptcy in many cases. The dean of the Alicante College of Economists predicts that filings will continue to rise in the coming months. He notes that Spain historically sees bankruptcy statistics underutilized, with many troubled companies avoiding regular liquidation entirely.
Fear of a flood of filings before the moratorium ends
When comparing Europe-wide data, Spain shows lower levels of bankruptcy filings relative to the number of companies, but this may be changing. The dean of economists highlights that the volume of work for the Salary Guarantee Fund is rising, and some expect about a 15 percent increase in contests already underway. Nonetheless, there is skepticism about the immediacy of a broad surge, with others arguing that many firms maintain solid solvency despite current pressures. [Source: General Assembly of the Judiciary; expert testimony from Alicante economists]