Within the insolvency field, the Benefit of Exoneration of Unsatisfied Liabilities or BEPI is a legal tool that provides relief to entrepreneurs (and any natural person in general) who find themselves in a situation of insolvency. With it, the entrepreneur can be totally or partially released from debts that he or she is unable to pay, provided that the established requirements are met. Thus, the BEPI represents an exception to the principle of universal patrimonial liability of the debtor established in Article 1911 of the Civil Code, which states that the debtor is liable with all his present and future assets for the fulfilment of his obligations.

Objective of the BEPI

The purpose of the BEPI is, as stated in the Explanatory Memorandum of the Second Chance Law: “to allow a natural person, despite a business or personal economic failure, to have the possibility to get his or her life back on track and even to risk new initiatives, without having to carry around indefinitely a burden of debt that he or she will never be able to pay off”.

How does BEPI work?

The BEPI is regulated in Articles 486 to 502 of Royal Legislative Decree 1/2020 of 5 May and has two possible modalities or regimes:

  • General or immediate payment regime: this involves the payment at the same time of a minimum amount of credits with the income generated by the liquidation of the debtor’s attachable assets.
  • Special Regime or subject to a payment plan: allows an initial partial exoneration of unsatisfied debts. Subsequently, the debtor must comply with a deferred payment plan approved by the insolvency judge.

Eligibility for the benefit of exoneration of unsatisfied liabilities

Subjective requirement: requirement of good faith

As mentioned above, the debtor-entrepreneur can only qualify for the benefit of the waiver of unsatisfied liabilities if he has acted in good faith. To prove this, two conditions must be met:

– The insolvency proceedings must not have been declared guilty. In practice, this requirement means that the BEPI can only be applied for once the debtor has already tried to resolve his payment difficulties by all means. In addition, he has had to prove that the insolvency proceedings are fortuitous. This is intended to provide maximum guarantees for creditors. The only exception foreseen for this condition is that the insolvency proceedings have been declared guilty because the debtor has failed to comply with the duty to apply for the declaration of insolvency in a timely manner. In this case, depending on the circumstances of the delay, the judicial authority may grant the BEPI.

– The debtor has not been convicted of offences related to dishonesty in business activity in the ten years prior to the declaration of insolvency proceedings. This includes offences against assets, against the socio-economic order, forgery of documents, against the Public Treasury and Social Security or against workers’ rights.

Objective requirements

As for the objective requirements, in order to obtain the benefit of exoneration of unsatisfied liabilities, it is necessary:

  • That in the insolvency proceedings all claims against the insolvency estate and privileged insolvency claims have been paid in full.
  • The debtor has concluded or attempted to conclude an out-of-court payment agreement with the creditors. Even if the agreement is not reached, is not complied with, is annulled or is terminated early for a reason not attributable to the debtor’s wilful misconduct or negligence. Only if the out-of-court payment agreement is terminated due to the debtor’s withdrawal will it be deemed not to have been attempted. Even in this case, the entrepreneur still has a chance to obtain the BEPI if in the insolvency proceedings he has satisfied the claims against the insolvency estate, the privileged claims and at least 25% of the ordinary insolvency claims.

If you are an entrepreneur and you are facing insolvency proceedings, Confianz can advise you so that you do not put your personal assets at risk.


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