Can I cancel my debts if I can't pay?
Yes, if you're a good-faith insolvent, through the Second Chance Law. The mechanism of discharge of unsatisfied liabilities lets individuals (private people and self-employed) cancel debts they can't meet, fully or partly, when there's real insolvency and they act in good faith. There are two routes: with liquidation of assets or, since the reform, without liquidation, following a payment plan over 3 or 5 years that lets you keep your main home and business assets. Requirements: insolvency (current or imminent), good faith (no conviction for certain economic crimes in the last 10 years), and liabilities not exceeding €5 million. In 2026, case law allows cancelling more of the public debt (Tax Office and Social Security), including subordinate surcharges and interest.
📋 The rules
- For individuals (private people and self-employed) who are insolvent
- Discharges debts fully or partly
- With or without liquidation (3-5 year payment plan)
- Can let you keep your main home in certain cases
- Requires good faith and liabilities under €5 million
🔓 Exceptions
- Generally excluded: maintenance/alimony debts and certain criminal fines
- A recent conviction for economic crimes excludes good faith
- Public debt is discharged with limits and conditions that case law has widened
⚠️ Penalties & fines
It's not a sanction mechanism but a relief one: the risk lies in not acting in good faith (hiding assets, falsifying data) or trying without meeting the requirements, which leads the judge to deny the discharge. It also doesn't cancel all debts (excluded, for example, maintenance/alimony and certain fines). It's a court procedure (individual insolvency) best handled with advice. Used well, it lets you start over; badly framed, it's dismissed. Gather your debt and income documentation before starting.
📎 Official sources
- BOE · Consolidated Insolvency Law (discharge of unsatisfied liabilities) →
- Administración · Second chance and debts →
- Judiciary · Individual insolvency →
❓ Frequently asked
What is the Second Chance Law?
It's the legal mechanism that lets good-faith individuals and self-employed people who can't pay their debts cancel them fully or partly (discharge of unsatisfied liabilities), through a court procedure, so they can start over.
Can I cancel my debts and keep my house?
In many cases, yes. The route without liquidation lets you follow a payment plan over three or five years and keep your main home and, where applicable, business assets, instead of liquidating all your assets to pay creditors.
Can debts with the Tax Office and Social Security be cancelled?
Increasingly so. 2026 case law allows discharging much of the public debt, and even fully the surcharges and late-payment interest classed as subordinate. It's a technical aspect best reviewed with a lawyer in each case.
What requirements must be met?
Being in real insolvency (current or imminent), acting in good faith (no conviction for certain economic crimes in the last ten years) and liabilities not exceeding €5 million. You don't need to be a business owner.
Are there debts that can't be cancelled?
Yes. As a rule, debts such as maintenance/alimony and certain fines and criminal liabilities are excluded from the discharge. Other debts (loans, cards, suppliers and much of the public debt) can be discharged.
🔎 Common searches
What people search to land here:
- “second chance law cancel debts”
- “discharge unsatisfied liabilities requirements”
- “second chance keep home”
- “cancel tax debt second chance”
- “second chance self-employed”
- “good faith requirements second chance”