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BACKGROUND ON SPANISH BANKRUPTCY LAW
Spanish bankruptcy law differentiates between two types of bankruptcy proceedings based on who is the party initiating this proceeding (article 29 Royal Decree 1/2020, of May 5th approving the consolidated text of the Bankruptcy law): a first insolvency proceeding is a voluntary insolvency, when the claim is filed by the debtor who cannot meet his financial obligations, and the second is a necessary insolvency, when the party initiating the insolvency proceeding is a creditor whose financial obligations have not been met by the debtor. These proceedings are available for natural persons and legal persons, either with an entrepreneurial activity or without it.
In addition to the party who files the claim before the court to initiate the insolvency proceeding, the law also differentiates between these two insolvency proceedings regarding the party who has the power to manage the assets throughout the proceeding. While under voluntary insolvency debtors can continue managing their assets – with some limitations-, under the necessary insolvency proceeding an administrator is appointed, and the debtor cannot manage his assets (article 106 of the Royal Decree 1/2020, of May 5th approving the consolidated text of the Bankruptcy law).
Once the insolvency proceeding has been initiated the judge assesses under article 37 bis of the Consolidated text of the bankruptcy law whether the patrimonial situation of the debtor should be qualified with assets or without assets.
The debtor, regardless of whether it has assets or not, can request to benefit for a debt waiver for natural persons with no assets. If the debtor is not under any of the exceptions of article 486 of the consolidated text of the Bankruptcy Law, the judge will be able to a waive the waivable debts of the debtor, who will be able to enjoy a second chance with a fresh start.
Figure 1 - Total amount of insolvency proceedings filed in Spain 2019-2024
The total number of insolvency proceedings file during the first trimester of 2024 which 13.148, that represented a 41.1% increase with respect to the previous trimester. Catalonia had the highest percentage of proceedings filed, 3416 applications, that represented a 26% of the total amount of applications filed. Doing the third trimester of 2024 the number of debtors filing for insolvency proceeding was 9833, a 1.4% increase compared to the previous trimester. Madrid had 2.195, Andalusia 1920 and València 1.567.
Source: CGPJ January 2025
Figure 2- Applicants for insolvency proceedings by their legal nature and type of insolvency and type of proceedings (2024)
In 2014 there were 200 new insolvency proceedings, while in the third trimester of 2024 they were 7690 in the whole Spain. In Catalonia, the amount of new insolvency proceedings of the first trimester was 51 and in the third trimester of 2024 was as high as 1962. That is, from the first trimester to the third trimester of 2024 the applications for insolvency proceedings of natural persons without an entrepreneur activity multiplied by 40.
Source: Spanish Registrars January 2025
Figure 3- Insolvency proceedings of natural persons without entrepreneurial activity per 10.000 inhabitants and per autonomous community (2024)
In the first trimester of 2024, Catalonia was the autonomous community with the highest rate of insolvency proceedings per 100.000 inhabitants. This remarkable number of cases reaches Catalan courts and disrupt the daily functioning of courts and the judge´s work.
Source: CGPJ January 2025
Figure 4- Insolvency proceedings of the first, second and third trimesters of 2024 in Barcelona
Barcelona is particularly affected by the large number of cases. Barcelona counts with 12 commercial courts. During the first, second and third trimester of 2024 there were 7.043 applications of insolvency proceedings of natural persons. 6.156 of them where of natural person not engaged in an entrepreneurial activity. The rest, 887, where of natural persons engaged in an entrepreneurial activity. These numbers show that the overwhelming majority of the insolvency proceedings of natural person filed in Barcelona, around 87% of the applications filed, are of individual citizens that cannot face their debts and liabilities regardless of market risks and their professional -non-entrepreneurial- activity.
It seems reasonable to assume that the majority of insolvency proceedings of natural persons in Barcelona respond to consumer debts.
Source: CGPJ January 2025
Insolvency proceedings of natural persons are a challenge for courts.
Having cases decided within a reasonable time is not only relevant for granting an effective judicial remedy but is also relevant for the wellbeing of claimants, who are individuals who cannot meet their debt obligations, causing personal distress, as well as for creditors, who should also be able to include the defaulted loan in their balance sheets and factor it in their financial decisions.
Hence, an AI judicial assistant is not only relevant for courts. The well-functioning of ionsolvency proccedings for natural persons with no assets is of crucial importance for debtors, creditors and society as a whole.
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