There is a powerful wave sweeping through households and small businesses. Since a recent reform took effect in September, procedures have been streamlined as much as possible, and the number of people applying for a second chance to erase debts is climbing to notable levels across Canada and the United States.
In the first half of the year, Commercial Courts across major provinces saw 825 bankruptcy petitions from individuals — roughly five every day. This is about four times higher than the same period in 2022, according to data from the General Assembly of the Judiciary, which recorded 227 requests. These figures hint at a continued rise when the total is fully counted, with 319 applications in the first quarter and 506 in the second quarter. The trend, clearly, is upward.
Legal experts are watching closely as this surge is compared to the impact of ground-breaking measures that followed earlier rulings deeming certain mortgage processes abusive and prompting thousands of lawsuits nationwide.
Second chance worth 3.4 million euros for a businesswoman from Alicante
In effect since 2015
What is known as the Second Chance Act was approved in 2015. From that date, individuals could access bankruptcy relief the same way companies do, allowing debts to be canceled permanently. Before then, people were tied to their unpaid bills for life, facing social and financial penalties even after a home or other asset was repossessed.
Initially, application levels were modest. In 2019, just four years after it began, Alicante saw 206 residents apply. The real transformation happened in September last year when the Bankruptcy Code introduced the express contest or quick-declaring option. This shortened procedure is designed for applicants without assets to cover their debts and even omits the need to appoint an insolvency administrator.
“The process is very straightforward now, and unless something unforeseen occurs, most transactions can wrap up within three months and the debtor can be free of debt for good,” explains a local practitioner. The requirements are simple: applicants must have acted in good faith, have no criminal record, and not have sought debt discharge in prior years. Word of mouth and a strong sense of necessity have driven people to try this approach, the lawyer notes.
Earlier, quarterly counts of cases reached around a hundred; in late 2022, natural persons requested 248 bankruptcy cases, 319 in the first quarter of 2023, and 506 in the following period. The same expert emphasizes the upward trajectory.
Most frequently used profiles
The profile of applicants, and the debt sizes, is becoming more varied. Ranging from a few thousand euros to several million, many involve businesspeople or relatives who personally guarantee business loans. The legal community notes that many are now freed from burdens tied to the past crisis nearly 15 years ago.
The court forgave an Alicante woman 235,000 euros for her ex-husband’s debts
There are also people who come for debts accumulated through microloans or revolving credit. Some tried to close gaps that regular earnings could not, while others faced debt from consumer loans after job loss. Gambling or other addictions also appear as common factors in these cases.
In contrast, corporate bankruptcy filings show a decrease of about 31 percent in the first half of the year, with business owners seeing about a fifty percent drop.
Unexpected risk, including exposure to crypto markets, is appearing among those seeking relief. Some applicants reported taking loans to invest in cryptocurrencies and losing substantial sums.