The end of automatic forgiveness: The Supreme Court toughens the Second Chance Law

 

Access to the Second Chance Law has undergone a drastic change in its practical application. What was once perceived as an almost guaranteed path for self-employed individuals and individuals in the absence of opposition from creditors has now become a process of rigorous judicial scrutiny. A recent ruling by the Commercial Section in Las Palmas de Gran Canaria, applying the Supreme Court doctrine from February 2026, marks a before and after in debt relief.

Judicial oversight ex officio

The main novelty lies in the fact that debt forgiveness no longer depends on a bank or supplier challenging the request. According to the new case law, the judge has the power and duty to investigate on their own initiative whether the debtor has acted in good faith. Even if the insolvency administration and creditors remain silent, the judge must scrutinize the applicant's prior financial behavior with a fine-tooth comb.

Negligence in indebtedness

The judiciary has begun to penalize what it calls a pattern of progressive indebtedness. This directly affects self-employed individuals and small businesses under the following criteria:

• It is not enough to be in a situation of insolvency; it is imperative to demonstrate that there was no negligence in assuming the obligations.

• Assuming new credits when the debtor is already aware that they will not be able to pay them with their available resources is considered negligent behavior.

• Contracting loans without a well-founded expectation of repayment is sufficient reason to deny the second chance, regardless of whether the insolvency is classified as blameworthy or not.

Demand for absolute transparency

To obtain the benefit of debt relief, the debtor must maintain total transparency from the outset. The ruling in Las Palmas emphasizes that personal or employment status does not exempt from the duty of prudence. In this case, forgiveness was denied because the debtor could not prove their actual income at the time of requesting the loans or the asset information provided to financial institutions. It is vital, therefore, to retain all documentation justifying the financial situation at each contracting moment.

The restrictive interpretation of good faith has come to stay. The unification of criteria by Commercial Court judges confirms that the process will be much more technical and demanding. For self-employed individuals and individuals looking to start from scratch, rigor in accounting and prudent debt management will be the only pillars to guarantee success under the new case law.