The Supreme Court has corrected the criterion of previous instances and has ruled in favor of a retiree who went into debt during the pandemic to financially help his daughter and son-in-law, affected by an ERTE in the hospitality sector. The high court considers that his action cannot be classified as culpable, but as a solidary response in an exceptional context, which will allow him to avail himself of the Second Chance Law.
The origin of the debt: the covid crisis
According to the ruling of the Civil Chamber, the events date back to 2019 and 2020, when the crisis derived from the coronavirus left her daughter's family unit without income. Faced with this situation, the retiree requested several loans until reaching a debt of 20,242 euros, with the aim of covering basic needs of the entire family, made up of six people.
The problem arose when, with an annual income of 27,869 euros —about 1,949 net euros per month—, the pensioner could not meet the payments. In 2021, he was declared bankrupt, all of them financial entities.
From culpable insolvency to fortuitous
Although the bankruptcy administration considered that the case should be classified as fortuitous, understanding that the indebtedness responded to an unforeseen situation —the unemployment and the ERTE of his/her relatives—, the prosecutor defended the opposite.
In its judgment, the retiree had requested financing “without any reason”, despite having sufficient income to cover his own needs. This interpretation was supported by the commercial court, which classified the bankruptcy as culpable considering that the man got into debt “knowing that he would not be able to repay the loans” and to cover third-party needs without legal obligation.
The Supreme Court corrects: there was no gross negligence
The affected party appealed until reaching the Supreme Court, where he argued that his situation responded to an extraordinary context. He defined himself as “a marriage of pensioner grandparents” who acted to help his family in the midst of a health crisis.
The high court has given him the reason. The magistrates consider that there is no “scandalous over-indebtedness” and emphasize that the money was allocated to essential needs, without superfluous or disproportionate expenses.
Furthermore, they put the focus on the context: the covid-19 pandemic was an exceptional and unforeseeable situation, which justifies economic decisions that, in other circumstances, could be questionable.
Although they recognize that there could have been certain negligence in not adequately assessing the repayment capacity, they conclude that it does not reach the level of gross negligence, a necessary requirement to maintain the classification of culpable insolvency.
Access to the Second Opportunity Law
The Supreme Court's decision has a key consequence: it will allow the retiree to avail themselves of the Second Chance Law, a mechanism that facilitates the total or partial cancellation of debts or their restructuring.
This benefit is, as a general rule, forbidden to those who are declared guilty in a bankruptcy proceeding, which is why the change of criterion turns out to be decisive for their economic situation.