Starting over when debts are drowning you is possible, and the legal tool to do so is the second chance mechanism. But there is a question that has caused a great deal of uncertainty for years: can you also cancel what you owe to the tax authority and Social Security? In this article we explain where the matter stands in 2026 and what it means for you if you are a good-faith debtor.
What the second chance mechanism is
The Second Chance Law allows an individual or a self-employed person who cannot meet their debts to obtain, subject to certain requirements, the discharge of unsatisfied liabilities. In plain terms: cancelling the debts they cannot pay and starting over without dragging them along for life.
It is not an automatic clean slate. It is a procedure with rules, deadlines and one indispensable requirement: being a good-faith debtor. The philosophy is to give a way out to those who have fallen into insolvency without fraud, not to reward those who act in bad faith.
The sticking point: public debt
For a long time, the big debate was whether the so-called public debt was also included among the dischargeable debts, that is, what you owe to the tax authority and Social Security. For many self-employed people, that is precisely the heaviest part of the burden.
Today the law allows public debt to be discharged, but within limits. It is not a matter of simply cancelling everything you owe to the Administration: the rule sets a maximum amount of discharge for each type of public debt. Above that cap, the debt remains.
That design seeks a balance: giving the debtor real breathing space without leaving public revenue entirely unprotected.
“At BBM Abogados we defend the interests of individuals and businesses in Santander and Cantabria with a close, rigorous and fully transparent approach. If you have doubts about your case, we help you see it clearly.”
Where recent doctrine is heading
The practical scope of that discharge has not been a peaceful terrain. The courts have had to interpret how the limits apply, which debts are included, how the discharge combines with payment plans and what leeway exists in each situation.
The Supreme Court has, through its rulings, been shaping the real scope of the discharge of public debt and clarifying points of interpretation that the law had left open. The general trend points to consolidating a framework in which public debt is indeed dischargeable within the legal limits, giving greater certainty to debtors who use the mechanism in good faith.
It is wise to be cautious: we are talking about an evolving area, in which the nuances matter and in which each ruling helps to set criteria. Precisely for that reason, a specific case should not be resolved on a hunch, but with an up-to-date analysis.
What it means for the good-faith debtor
If you are in a situation of genuine insolvency and have acted honestly, the current scenario is more favourable than it was a few years ago. Being able to include part of the debt with the tax authority and Social Security among what is dischargeable can make the difference between a viable way out and remaining trapped.
But two ideas must be stressed:
- Good faith is the key. If that requirement is not met, there is no access to the discharge. Cooperating, being transparent and not having culpably caused the insolvency is essential.
- The limits exist. Do not assume that all the public debt is cancelled. The prudent thing is for a lawyer to calculate what part, in your case, is genuinely dischargeable.
The next step
The second chance mechanism has strict formal requirements and connects with insolvency proceedings, so a mistake in the approach can cost you the discharge. That is why it is worth doing it properly from the start.
At BBM Abogados, a firm in Santander since 1990, we study your situation, assess whether you qualify as a good-faith debtor and prepare the application to maximise what you can discharge. If you would like to know the details of the Second Chance Law or of an insolvency proceeding, we are at your disposal. Call us on 942 36 10 48 or write to us via /contacto/ and we will start studying your way out.