Five Years to Clear €135,000 Debt via Spanish Insolvency

€135,000 debt, five years, and €8,000 for the insolvency administrator

The Second Chance Law does not work as quickly as its name promises. A father of two, married under a separation of property regime, had accumulated €135,000 in loans —with no mortgage and no debt to the Tax Agency or Social Security— and was paying more than €2,000 a month on a salary of €1,800. He stopped paying in September 2017. Five years later, he was still waiting for the court order closing the insolvency proceedings, with more than €25,000 blocked in his account.

This case illustrates the downside of a tool designed to help individuals and freelancers escape crushing debt: the procedure exists, but the machinery executing it runs on pedals.

From credit cards to loans and up to €135,000

The origin of the debt is no financial mystery. It started with a loan to pay for his share of the wedding, trinc by job loss fifteen days before the ceremony. Then came the credit card: "I used the card to make ends meet; when it was maxed out, I took out a loan to clear it, and so on..." He summarized. This was compounded by failed investments with relatives. No gambling, alcohol, or drugs. Just a chain of bad decisions and a hole that grew with interest.

The final figure did not include a mortgage or debts to public administration. All creditors were lending institutions. The detail matters: the profile described here is not that of a professional debtor, but of someone who covered one hole with another until they could no longer even pay the interest.

Five years of insolvency: the real timeline of the process

The timeline, based on the account itself, is an inventory of delays. In September 2017, payments stop and the notarial route begins. In February 2018, it closes without agreement with creditors. The court admits the insolvency in November 2018 and appoints an insolvency administrator. The interview with her comes in January 2019. In February of that year, dismissal and unemployment benefits.

In November 2019, the administrator takes control of the accounts and sets an allowance of €900. The court responds in February 2020 that the reference is the SMI (Minimum Interprofessional Wage), €950 in 14 installments or €1,108 in 12; the administration decides on its own to limit it to €950 in 12 installments. The pandemic arrives, courts shut down, and the administration's report is not submitted until October 2020, two years after their appointment. Challenging the list of creditors takes fourteen months to resolve. In March 2022, closure is requested; the administrator does not act until October. The court drags ten months of delay and admits it has no time for the case.

Meanwhile, there are 10 to 12 calls daily, collection letters, and entries in delinquency registries. There are even threats to show up at the workplace.

Who gets paid in an insolvency and how much

The money does not disappear; it changes hands. The declared breakdown:

• Lawyer: approximately €3,500
• Notary: €1,000, plus solicitor fees
• Insolvency Administrator: approximately €8,000 expected, versus the €800 or €900 set by law according to the debtor

The last item is the most jarring. The administrator withheld 50% of their legal fees in March 2022 and, according to the debtor's version, demands an extra payment outside the official scale to approve the closure. The matter was settled with an agreement that will deduct a significant amount from the retained funds.

Slow justice is not justice, but it is what we have

The diagnosis hovering over this case is not legal, but logistical. First-instance courts accumulate delays that turn a theoretically agile procedure into a bottomless pit, and the insolvency administrator is paid based on the amount of the process, not its estimulante ilegal. Some recall separations of property that took a decade to resolve.

Judicial costs add fuel to the fire. One participant calculates that a €5,000 debt can generate another €10,000 in costs, making collection irrational for both parties. When the court already warns that it has no time to look at the file, the most modern law in the BOE (Official State Gazette) is left without an engine.

Debt with soul and debt without soul

The sarracena reproach appears early: whoever owed €135,000 also has creditors. The most articulated response distinguishes two categories. Debts to specific people —friends, family, freelancers, small business owners— would be sacred. Those against banks, the State, and large funds would be utilitarian: "Huge entities that discount defaults in their forecasts and where no individual is sarracena affected."

In the middle, a disorienting fact: credits have been sold and resold to recovery funds that pay a minimal fraction of the nominal value and then pursue the total with added interest. Others argue the opposite, without nuance: that using this law is a scam against the creditor and that the debtor should pay 100% plus interest, even if it costs them their entire working life.

The process remains open as of the latest messages: final report submitted, fees collected, and awaiting the judicial order. With these timelines, any prediction is reckless. If the order arrives in weeks, the case will remain a statistical anomaly; if it takes months, it will stand as proof that reforming the law without reforming the courts serves mainly to inflate the bill.