Spanish Liquidation and Bankruptcy: Frequently Asked Questions

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What is bankruptcy (concurso de acreedores) in Spain, and how does it work?

Bankruptcy in Spain is a legal process for individuals and businesses that cannot meet their financial obligations. It allows for debt restructuring or liquidation under court supervision. The goal is to reach an agreement with creditors or, if that is not possible, to distribute available assets fairly.

Who can file for bankruptcy in Spain?

Both individuals and businesses can file for bankruptcy if they are insolvent, meaning they are unable to pay their debts as they come due. In some cases, company directors must legally file for bankruptcy within two months of becoming insolvent to avoid personal liability.

What are the different types of bankruptcy in Spain?

Voluntary Bankruptcy (Concurso Voluntario): The debtor voluntarily initiates the process upon realizing they can no longer meet financial obligations.
Forced Bankruptcy (Concurso Necesario): A creditor or another party forces a debtor into bankruptcy after prolonged non-payment (typically more than three months). This can lead to the debtor losing control over their company.
Pre-bankruptcy (Preconcurso de Acreedores): The debtor informs the court that they are negotiating with creditors to prevent full bankruptcy. This process grants a legal period (up to four months) to reach an agreement without official bankruptcy proceedings.

What happens to debts when someone or a business declares bankruptcy?

For businesses: Debts can be renegotiated, reduced, or even forgiven as part of a restructuring plan. If liquidation occurs, the company’s assets are sold to repay creditors. If debts remain unpaid after liquidation, they may be written off unless company directors are held personally liable.
For individuals: Debt restructuring is possible, and under the Second Chance Law, some debts may be fully forgiven (BEPI). However, certain debts—such as taxes and child support—may not be discharged.

Can I keep my assets if I file for bankruptcy in Spain?

It depends on the case:

If liquidation occurs: Most assets, including property and vehicles, may be sold to pay creditors.
Under the Second Chance Law: Individuals may be able to keep essential assets, such as a primary residence, if they can continue making mortgage payments and meet legal conditions. However, if the home is deemed excessive for their needs, it may still be sold.

What is the Exoneration of Unsatisfied Liabilities (BEPI), and how does it help individuals?

The BEPI (Beneficio de Exoneración del Pasivo Insatisfecho) allows individuals to have their debts forgiven after bankruptcy if they:

Acted in good faith (did not commit fraud or hide assets).
Attempted to settle debts before filing (e.g., through a pre-bankruptcy agreement).
Meet financial hardship criteria (proving they are unable to repay the debts).

If granted, the BEPI clears most debts, but certain obligations like public debts (taxes, Social Security) may still need to be paid.

How long does the bankruptcy process take in Spain?

For individuals: A simplified procedure can take 6-12 months, especially under the Second Chance Law.
For businesses: Corporate bankruptcies can take several years, depending on the complexity of creditor negotiations.
If fraud, mismanagement, or disputes arise: The process may be significantly delayed.

Can creditors still pursue me after I file for bankruptcy?

No. Once bankruptcy proceedings begin, an automatic stay is imposed, preventing creditors from pursuing legal action or enforcing debts. However, secured creditors (e.g., mortgage lenders) may still be able to recover assets if the debtor fails to meet repayment conditions.

What are the alternatives to bankruptcy for individuals and businesses in Spain?

Debt restructuring (Acuerdo Extrajudicial de Pagos): A formal agreement with creditors to modify payment terms, often supervised by a mediator.
Debt refinancing: Obtaining new loans to consolidate or extend repayment deadlines.
Private agreements with creditors: Informal settlements reached outside of court.
Company restructuring (Concurso Express or Refinancing Agreements): Accelerated processes that allow businesses to avoid full bankruptcy and continue operations.

How does bankruptcy affect my credit score and future financial activities in Spain?

Credit impact: A bankruptcy record can remain on credit reports for 5 to 10 years, making it difficult to obtain new financing.
For individuals under BEPI: While they are legally debt-free, their ability to get credit may still be affected.
For businesses: Companies that have gone through bankruptcy may struggle to obtain new loans unless they demonstrate financial recovery and stability.