Complete Guide to Applying for the Exoneration of Unsatisfied Liabilities (EPI) in 2024

The Exoneration of Unsatisfied Liabilities (EPI) is an increasingly important resource for those who are going through insolvency situations and are looking for a new financial start.

With Law 16/2022 and its recent amendments, the EPI has been consolidated as a right that makes it easier for debtors to free themselves from certain debts under specific conditions.

In this article, I detail the application process for EPI in Spain, the access requirements and the impact of the new regulatory framework on debtors’ lives.

What is the Exoneration of Unsatisfied Liabilities?

The Spanish Insolvency Law (Art. 413.1.3º) has transformed the EPI from a «benefit» to a «right». This means that, under specific conditions, debtors can request the discharge of their debts without having to liquidate all their assets.

This change seeks to offer a «second chance» and promote the economic reintegration of people who have fallen into insolvency.

Before which Agency is it requested?

Prior to this reform, debtors had to try to reach an out-of-court agreement with their creditors, mediated by a notary or insolvency mediator, which complicated and made the process more expensive.

Currently, the EPI is requested directly before the Commercial Court of the debtor, without the need for a notary or an extrajudicial agreement. This simplifies and streamlines the process, which previously required mediation.

Access Requirements: Who can apply for EPI?

In order to access the EPI, it is essential that the applicant meets the requirements established in Articles 487 and 489 of the TRLC. Below, we address each of them.

1. Insolvency Situation: EPI is available to persons who are unable to meet their payment obligations (insolvent). It does not apply in cases of slight over-indebtedness; it must be a serious insolvency, as indicated in the Insolvency Law.
2. Good Faith of the Debtor: Good faith is a key requirement, requiring that the debtor has not concealed assets or acted irresponsibly in getting into debt. This presumption is lost if the debtor incurs in cases of bad faith, such as convictions for socioeconomic crimes or non-compliance with tax obligations.

Modalities of the EPI: Payment Plan or Liquidation

One of the most outstanding novelties of the reform is the possibility of choosing between two modalities for requesting EPI: with a payment plan (Art. 496 TRLC) or through liquidation of assets (Arts. 501 – 502 of the TRLC). These options allow the debtor to adapt the request to its economic situation. Thus:

1. EPI with Payment Plan. In this modality, the debtor can keep its professional or business activity, establishing a payment plan detailing its exonerable debts, their maturities, and the «vital minimum» necessary for its sustenance.

In addition, the plan must be adjusted to the debtor’s foreseeable income and resources, and is granted for a term of three years, extendable to five in specific situations (Art. 497 TRLC).

The advantage of the payment plan is that it does not require the liquidation of assets, which allows debtors to maintain their economic activity.

1. EPI by Liquidation of Assets (Art. 501 and 502 TRLC) For debtors who prefer a quicker discharge, the asset liquidation option allows immediate release of the debt in exchange for liquidating the available assets.

This modality is useful when the assets are not sufficient to cover the receivables and there are no means to draw up a payment plan.

How do I Prepare the Payment Plan: Requirements and Deadlines?

The payment plan is a crucial document. It should detail the resources and income the debtor will have, the dischargeable debts and their terms, and the minimum amounts needed to cover basic needs. It should also include any assignment in payment of assets that are not necessary for his professional activity.

For cases in which the debtor does not liquidate his habitual residence or depends on variable income, the term can be extended to five years.

Can Creditors Challenge the Plan?

It is important to know that creditors have the right to challenge the payment plan if more than 80% oppose it on the grounds that it does not guarantee adequate collection of their debts (Art. 498 bis TRLC).

In any case, the judge has the last word and can decide to approve the payment plan if he considers it to be the best option, even with the majority opposition of the creditors.

Which debts are not dischargeable?

Law 16/2022 introduces specific categories of debts that cannot be exonerable, such as:

1. Debts for salaries (Art. 489.1.3.º TRLC): Includes unpaid salaries of the last 60 days, up to three times the minimum interprofessional salary.
2. Public law debts (Arts. 488.3 and 489.3 TRLC): Tax and social security debts can be exonerated up to a limit of 10.000€, of which the first 5.000€ can be exonerated in full and the following 5.000€ at 50%.
3. Secured debts (Art. 492 bis.2 TRLC): They cannot be exonerated in their entirety, but the debtor must continue to pay at least the value of the security interest.

Deadlines for Reapplying for EPI

The Insolvency Law establishes that, after having requested the EPI, there are certain waiting periods to reapply:

• EPI by Payment Plan: Two years from the previous grant (Art. 488.1 TRLC).
• EPI through Liquidation of Assets: Five years waiting period (Art. 488.2 TRLC).

When can the EPI be revoked?

In the event that the debtor experiences an economic improvement in the three years following the granting of the EPI, the creditors may request the partial or total revocation of the exoneration (Art. 493 TRLC).

For example, if the debtor wins the lottery or receives an inheritance, or is found in possession of assets that were not declared (possible bad faith).

Updating in Credit Information Systems

Finally, Art. 492 ter TRLC allows the debtor to request the updating of its credit history. This means that, after the definitive exoneration, the previous delinquency data are eliminated, which facilitates their economic reintegration and access to credit.

Conclusion

EPI in Spain offers debtors a second economic opportunity, balancing their needs with creditor protection. By complying in good faith and choosing the right modality, debtors can free themselves from debt and restart their financial life.

If you feel you’re in this situation and need support, at Larios Tres Legal we provide guidance and manage every step of the process so that you feel accompanied and supported at all times.

Autor

Susana Domínguez Romero 
Attorney

Contact information
 + 34 697 302 341 
 susana.dominguez@lariostreslegal.com

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