The 7th Session of the Cycle of analysis of the most relevant issues of the TRLC is dedicated to the problem of the conclusion of the contest and the benefit of exoneration of the unsatisfied liability, the so-called second opportunity. Each of these issues raises a large number of questions, some of them clearly controversial, and all of them open to debate and in need of interpretation; so that, as is customary in the various sessions, it is essential to select the issues that may be of most interest.
The conclusion of the contest is now regulated in the TRLC (articles 465 and following) with a new system in which each cause of conclusion has its own particular regime; but some new cause has also been added, such as the existence of a single creditor. The so-called “conclusion or express file”, When the declaration of the contest and its conclusion appear simultaneously linked, or the conclusion occurs due to insufficient mass shortly after being declared.
The second chance regime, belatedly incorporated into our bankruptcy legislation, and included by the TRLC in articles 486 et seq., Has been raising questions of special interest regarding the concept of “bona fide debtor”, The scope of the exemption and the effect on public credit, the relationship between the provisional and definitive granting of the exemption benefit, the content of the payment plan, or the effects of the revocation of the benefit, among others.
The content of the session revolves mainly around these questions, which are considered of special interest and of undoubted practical relevance.
- Jose Maria Blanco Saralegui, Counsel in the procedural and arbitration area of Uría Menéndez. Magistrate on leave of absence
- Maria Del Mar Hernandez Rodriguez, Magistrate of Section 4 of the Provincial Court of Cantabria.
EXONERATION OF UNSATISFIED LIABILITIES
There are many issues that can be dealt with in relation to the unmet liability exemption benefit. Of all of them, we select some related to the application, the effects of the recognition of the benefit, the revocation of the provisional benefit and the definitive granting of the benefit. Next we will expose those related to the new regulation of the requirements for obtaining the benefit of exoneration of the unsatisfied liability, the regulation of the payment plan, the existence of a possible ultra vires in the regulation of the effects, the extension of the cause of revocation of the provisional benefit due to non-compliance with the payment plan, the allegations that the debtor can make against the request for revocation for this reason, the effects of the definitive recognition of the debtor who does not comply with the payment plan and the situation of the debtor who does not obtain the benefit of definitive exoneration for not having complied with the payment plan or for not being interested.
In general, it should be noted that, although this was not a difficult task, the regulation contained in the TRLC substantially improves the one contained in the only provision dedicated to it in the LC, that is, art. 178 bis.
The novel regulation of requirements
The TRLC has opted for the clear distinction of two different regimes to access the benefit of exemption of the unsatisfied liability: general regime and special regime of exemption for the approval of a payment plan. Both share a subjective budget and vary in the subjective one.
The subjective budget regulated in art. 487 TRLC is specified in good faith that continues to maintain an absolute leading role although it is limited to the concurrence of two requirements: that the contest has not been qualified as guilty (That the contest has not been declared guilty. However, if the contest had been found guilty for the debtor having breached the duty to promptly request the declaration of insolvency, the judge may grant the benefit according to the circumstances in which the delay had occurred) and that the debtor has not committed certain crimes (That the debtor has not been convicted in a final judgment for crimes against property, against the socio-economic order, of documentary falsification, against the Public Treasury and Social Security or against the rights of workers in the ten years prior to the declaration of insolvency. pending criminal proceedings, the bankruptcy judge must suspend the decision regarding the exoneration of the unsatisfied liability or until a final judicial resolution falls).
It is necessary to reward that, regarding the first, in order to appreciate good faith in the debtor despite the guilty qualification for the delay in the bankruptcy request, it is specified that the circumstances to be assessed are those in which the delay had occurred in the application. In relation to the second, that it be corrected that the suspension of the decision regarding the exoneration in the event that there is a pending criminal procedure will be until a final resolution falls, although it does not have the form of a sentence as erroneously required in art. 178 bis 3 LC).
With this, the TRLC maintains the configuration of good faith as a normative concept, it should be remembered that STS 381/2019, of July 2, according to which “the legal reference to the debtor being in good faith is not linked to the concept general of art. 7.1 CC, but to compliance with the requirements listed in section 3 of art. 178 LC ". In turn, the sentence completes the configuration of good faith for exoneration purposes, noting that “Therefore, the complaint of the lack of good faith required by art. 178 bis 3 LC must adhere to the fulfillment of these requirements and not, as underlies the argument of the first reason, that the existence of a credit against the estate had been omitted in the initial application, which later, when the AEAT opposed, was admitted ”.
Regarding the objective budget, the payable is separated in the case of the debtor who accesses the benefit according to the general regime and according to the special regime. In the first, a duality of requirements is established that are associated with different benefit effects, linked to the attempt to reach an out-of-court settlement of payments and the payment of a certain range of the liability. Specifically, art. 488 TRLC refers to “1. In order to obtain the benefit of exoneration of the unsatisfied liability, it will be necessary that in the bankruptcy the credits against the estate and the privileged bankruptcy credits have been fully satisfied and, if it meets the requirements to be able to do so, that the debtor has entered into or , at least, tried to enter into an out-of-court payment agreement with creditors. 2. If the debtor who meets the requirements to do so has not attempted an out-of-court settlement of prior payments, he may obtain that benefit if the bankruptcy of creditors had satisfied, in addition to the credits against the estate and the privileged credits, at least , twenty-five percent of the amount of ordinary bankruptcy credits ”.
In the case of access to the benefit under the special regime for the approval of a payment plan, the requirements for compliance with the target budget set forth in art. 493 TRLC correspond to some of which art. 178 bis 3 LC linked with the debtor who had not met the minimum threshold of the liability. Now they are specified in 1. Not having rejected within the four years prior to the declaration of insolvency a job offer appropriate to their capacity. 2. Not having breached the duties of collaboration and information regarding the bankruptcy judge and the bankruptcy administration. 3.º Not having obtained the benefit of exoneration of the unsatisfied liability within the last ten years.
Interesting in this regard is the judgment of the Murcia Provincial Court of September 8, 2016 on the distinction between the guilty qualification for failure to comply with the duties of collaboration with the bankruptcy judge and the bankruptcy administration and the requirement to obtain the consistent benefit in not having breached the duties of collaboration and information with the bankruptcy judge and the bankruptcy administration, restricting the former to the most reprehensible behaviors. Thus it considers that “5. The way to make sense of the normative provision that concerns us is to consider that while the most serious and most important breaches of the duty of cooperation are located within the scope of art 165 LC, with an aggravated culpable reproach (intent or gross negligence), In the area of debt exemption, lighter or less significant defaults are understood in the specific case in which this benefit is sought for the sole commitment to service the debts in accordance with a five-year payment plan, which, as we have Seen, it imposes additional respect for the alternative exemption mechanism for immediate satisfaction of a minimum threshold. That such divergence of treatment has been criticized doctrinally at the level of principles, does not prevent us from taking it into consideration, out of respect for the principle of legality (art. 1, 9 and 117 CE) ”.
In addition to this, the debtor who accesses the benefit under the special regime must have agreed to submit to a payment plan.
The payment plan
In the regulation of the payment plan, the TRLC has chosen to maintain a similar one to the one contained in art. 178 bis 5 LC although there are some novelties that raise doubts. Specifically and, especially, the determination of which are the ordinary credits that according to art. 495 TRLC can collect the plan, beyond the public law credits and for food that are already expressly listed in said precept. The question arises as to whether it is an error by the legislator, if he is thinking of the debtor who accesses the benefit through the general regime but who, having not tried an out-of-court payment agreement despite being able to do so, is not exonerated from 25% of the ordinary liability (but it is not required to submit to a payment plan) or if it is allowing the debtor to offer to pay part of the ordinary liability.
The second question we ask ourselves is whether or not there is an ultra vires in the requirement that, with respect to public law credits, the processing of requests for postponement or fractionation will be governed by its specific regulations, leaning towards the opposite answer to the faithfully follow this precept art. 178 bis 5 LC. All this, without prejudice to the fact that art. 495 TRLC has to be interpreted in accordance with the STS of July 2, 2019.
The effects of the exoneration and the doubts for possible ultra vires
One of the most controversial issues in the new TRLC has been the regulation of the effects of the exemption of unsatisfied liabilities. The LC suffered from a defective legislative technique when dealing with the effects of the exoneration by referring exclusively to art. 178 bis 5 for the purposes in the case of the debtor subject to a payment plan, that is, the one who obtained the benefit on a provisional basis. On the other hand, it said nothing about the effects of the immediate and definitive exoneration, that is, of the debtor who had satisfied the minimum threshold of the liability due to those who did not adhere to a payment plan. The STS of July 2, 2019, interpreted art. 178 bis and resolved that the exoneration in the case of the debtor who definitively obtained the benefit was total, affected by all pending liabilities, including public law and maintenance credits. In turn, in the case of a debtor subject to a payment plan, making a corrective interpretation, it considered that the exemption affected ordinary and subordinated public law and maintenance credits.
The TRLC, in accordance with its task of clarifying, harmonizing and filling legal gaps, deals with art. 491 of the effects of the exemption under the general regime that covers ordinary and subordinated liabilities with the exclusion, in one case (debtor who tried an AEP or could not try it) of public law credits and maintenance and, in another ( debtor who may not have attempted an AEP), 25% of ordinary liabilities. In turn, in the case of the debtor subject to a 497 TRLC payment plan, following what is regulated in art. 178 bis 5 LC, extends the exemption to ordinary and subordinate liabilities with the exception of public law credit and maintenance. Consequently, in both cases the exemption may not be total.
Faced with this new regulation, various doubts have been raised related to the possible existence of an ultra vires. The discussions have not been raised exclusively in the doctrinal sphere, but have already been reflected in different judicial criteria. An example of this are the Orders of the Commercial Court No. 1 of Oviedo, of January 13, 2021, of the Commercial Court No. 1 of Coruña, of October 6, 2020 or of the Commercial Court No. 1 of Madrid , of December 21, 2020 that did not appreciate the existence of an ultra vires. On the other hand, others such as the Orders of the Commercial Court No. 7 of Barcelona of September 8, 2020 and the Commercial Court No. 13 of Madrid of October 8, 2020 conclude that there is an ultra vires in the new regulation .
In our opinion, there are no ultra vires. Let us not forget that the work of recasting standards is a task of reordering, harmonization and clarification and allows for the introduction of additional and complementary standards when it is necessary to fill gaps. In the case of art. 491 TRLC there are no ultra vires, but what the TR does is fill a legal loophole. Neither in the case of art. 497 TRLC that follows art. 178 bis 5 LC. All this without prejudice to the fact that in the interpretation of these rules the jurisprudential doctrine established in the STS of July 2, 2020 must be followed.
In any case, it would be desirable to take advantage of the transposition of Directive EU / 2019/1023 of the Parliament and of the Council, of June 20, 2019, on preventive restructuring frameworks, debt relief and disqualifications, to introduce by means of a legal reform the new regulation of effects and avoid a risk of ultra vires.
Another question that arises is that derived from the different regulation of the two cases of art. 491 TRLC. It establishes different criteria regarding the debtor who tried an AEP or who could not try and who, being able to do so, did not try. In the first case, you are exonerated from all pending liabilities less public law credits and maintenance. In the second, he is exonerated from the ordinary 75% and all the subordinate.
In view of this regulation, what happens to the public law credit and maintenance in the case of the debtor of art. 491.2 TRLC that did not attempt an AEP being able to do so. If the omission of the reference to these credits is a mere forgetfulness and error and the exoneration should never extend to them, if the rule of paragraph 1 is a general clause or if, on the contrary, what has been intended is to establish a regime completely disparate.
Understanding that an extensive interpretation of the limitations to the exemption of the pending liability cannot be made, despite seeming to be an internal incoherence of the system, we are inclined to understand that the debtor who did not attempt an AEP, being able to do so, will be exonerated from all the pending liability Except for 25% of ordinary liabilities, without applying the exception of public credit and food, although perhaps it would be appropriate to clarify this issue also in a future reform of the TRLC and for the consistency of the system apply the same rule on food and credit of public law in both cases.
The revocation of the benefit for breach of the payment plan.
Among the issues raised by the revocation of the exemption benefit, is the one related to the defense weapons that the debtor can use when the breach of the payment plan is invoked as a cause.
In principle, the only cause of opposition of the debtor will be proof that the payment plan has been fulfilled or that it is being fulfilled. However, considering that even when it is not complied with, it is possible that the benefit is obtained definitively provided that the judge assesses, taking into account the concurrent circumstances, that the debtor who had not fully complied with the payment plan would have allocated to his compliance with at least half of the income received during the period of five years from the provisional granting of the benefit that were not considered to be unattachable or a quarter of said income when the circumstances provided for in article 3.1 concur with the debtor, letters a) and b), of Royal Decree-Law 6/2012, of March 9, on urgent measures for the protection of mortgage debtors without resources, regarding the income of the family unit and family circumstances of special vulnerability, is deserving of the benefit definitive (art. 499.2 TRLC).
We understand that the debtor may oppose the revocation request for non-compliance with the payment plan, invoking that he has made said sacrifice to try to comply with the payment plan and that there are also circumstances that have prevented further compliance. That is, that it has made the minimum effort required and that it is deserving of the non-application of the effects derived from the breach. These circumstances may include those derived from the current economic situation linked to the pandemic.
Extension of the effects of the definitive recognition to the debtor who does not comply with the payment plan
One thing that is not clarified in art. 499 TRLC, just as art. 178 bis or LC, is if the debtor to whom the exemption benefit is definitively recognized despite not fully complying with the payment plan is exonerated from all the liabilities that were provisionally exonerated at the time (ordinary and subordinate) or if, on the contrary, this exemption also reaches the pending liability that should have been attended according to the payment plan. This is not a trivial question. Despite the silence of art. 499 TRLC we are inclined to think that in these cases the exoneration will be total and will affect all the liabilities, both the one that was provisionally exonerated and the one that was included in the payment plan and not taken care of. Again, we consider that this is one of the issues that should be addressed in the future reform of the TRLC to address the transposition of the Directive.
The situation of the debtor who does not obtain the definitive benefit
It is stated what happens to the debtor who obtained the benefit provisionally and who does not obtain definitive recognition. Either because your request is rejected when you fail to comply with the payment plan and there are no justifying circumstances for the definitive recognition (because you did not make the minimum effort required or have done so, but there are circumstances that do not make you worthy of the definitive recognition), or because you are not interested in the debtor this definitive acknowledgment and the creditors have not been interested in the revocation. None of these assumptions is regulated.
- The effects of the rejection of the request for definitive exoneration
In the first place, doubts arise as to what happens in the case of the debtor who is interested in the definitive recognition of the benefit, but is rejected. Art is forgotten. 499 TRLC of this assumption and nothing is regulated about it. It is asked if this means the revocation of the provisional benefit or if the provisional effects are maintained. Here we are inclined to understand that the decision of the judge that rejects the definitive concession of the benefit has similar effects to the revocation at the request of the party.
- Debtor not interested in the final recognition
The second assumption that raises doubts is what happens with the debtor that once the term established for the fulfillment of the payment plan has elapsed, the definitive recognition is not interested, ordinarily because it does not meet the requirements for it, without any creditor having interested in the payment. term and form provided for in art. 498 TRLC the revocation of the provisional benefit.
In these cases, we see no inconvenience that the application for final recognition is submitted late and that it is recognized if the requirements are met.
On the other hand, taking into account the change in the wording of art. 498 TRLC (revocation can be requested during the period set for compliance with the payment plan) against art. 178 bis 7 LC (creditors may request revocation if during the period set for the fulfillment of the payment plan the debtor incurs in any of the causes of revocation without referring to the term for its exercise), we consider that it will not be possible to interest the revocation of the provisional benefit belatedly by the creditors.
When the creditors did not urge the revocation of the provisional benefit in time and the debtor does not request the definitive recognition of the benefit, we understand that there is no such thing as an expiration of the provisional benefit or elimination of its effects. Therefore, creditors holding exonerated liabilities may not address the debtor. On the other hand, holders of non-exonerated liabilities will be able to address themselves to the debtor.
THE EXPRESS FILE
The figure of the express file is still paradoxical. In principle, bankruptcy is a universal procedure aimed at satisfying the creditors of a debtor by signing an agreement or liquidating their assets. However, the express file admits the ab initio frustration of this purpose, the impossibility of fulfilling it and despite this, it formally allows the contest to be declared and concluded in the same resolution when it seems that the procedural logic would lead to the rejection of the application.
There have been few problems that the application of this provision included in art. 176 bis 4 LC generated, some of which remain in the TRLC which has caused new ones. We will refer to them as to whether there has been a change in the requirements for the simultaneous conclusion of the declaration and the problem in relation to the possible express file in the case of the legal person debtor.
Budgets to proceed with the simultaneous declaration and conclusion of the contest
The art. 176 bis 4 LC established that “The conclusion due to insufficient mass may also be agreed in the same insolvency declaration order when the judge clearly appreciates that the bankrupt's assets will not presumably be sufficient for the satisfaction of the foreseeable credits against the mass of the procedure nor is it foreseeable the exercise of action for reintegration, challenge or liability of third parties ”. Against this, the new art. 470 establishes that “The judge may agree in the same order of declaration of insolvency the conclusion of the procedure when he clearly appreciates that the active mass will presumably be insufficient to satisfy the possible expenses of the procedure, and, furthermore, that it is not foreseeable the exercise of reintegration or third party liability actions or the classification of the bankruptcy as guilty ”.
There are several editorial changes. The LC spoke of insufficiency of assets while the TRLC refers to the insufficiency of the active mass. The LC linked this insufficiency with the payment of the foreseeable credits against the estate and the TRLC tied it to the possible expenses of the procedure. There is also a difference in the actions whose predictability the judge has to assess. The LC referred to an action for reintegration, challenge or liability of third parties while the TRLC actions for reintegration or liability of third parties or the classification of the bankruptcy as guilty.
However, we consider that these drafting changes have not led to an alteration in the requirements required for the declaration and simultaneous conclusion, but rather that, in any case, what should prevail is the improvement in the drafting due to the clarifications that it entails. Let's look at each of them.
The substitution of assets for assets is consistent with the changes contained in this regard in the TRLC, as an example art. 106 when referring to the effects of the declaration of insolvency on the debtor's patrimonial powers, now referring to the active mass and not to the patrimony, as was done in art. 40 LC.
The reference to the bankruptcy expenses and not to the credits against the estate clarifies and collects what was commonly admitted, in the sense of understanding that, of all the credits against the estate, those that had to be valued for the purposes of the sufficiency of the assets were those related to the expenses of the insolvency procedure, thus being extracted from the reference to "the foreseeable claims against the proceeding assets" and not to any others. It also takes on all the sense that in the case of the conclusion due to insufficiency during the processing of the procedure, the focus is on all credits against the estate since they are not neglected, but are satisfied as far as possible. by the new order contained in art. 250 TRLC. On the other hand, in the case of simultaneous declaration and conclusion, what is relevant are the credits against the mass that will be generated by the processing of the bankruptcy.
The reference to the reintegration or liability actions of third parties or the classification of the bankruptcy as guilty, implies an improvement in that it covers all the possible cases that allow to complete and complement the active mass.
Declaration and conclusion in the case of a natural person debtor
Classic has been the controversy during the validity of the LC not consolidated about whether it was possible to declare and conclude the bankruptcy simultaneously in the case of a natural person debtor. We understand that these doubts are cleared in art. 472 TRLC where without a doubt it refers now to the simultaneous conclusion of the contest.
In any case, it is a mere possibility, and it is not mandatory to proceed to the simultaneous conclusion of the declaration. In addition, on many occasions it will be more convenient to declare and process the bankruptcy in order to be able to liquidate the debtor's assets and properly process the possible request for exoneration. In this sense, the recent order of the Commercial Court No. 13 of Madrid, of December 2, 2020 admits the possible simultaneous declaration and conclusion, but considers that it is more appropriate to process the bankruptcy, taking into account, among other aspects, the importance of the CA report to obtain the exemption benefit.
THE CONCLUSION OF THE CONTEST
The regulation of the conclusion of the contest in the TRLC also contains some novelties, of which those related to the existence of a new cause of termination and the novelties in the regulation of accountability were dealt with.
The new cause of conclusion of the contest.
In addition to the causes provided for in article 176 of the Bankruptcy Law, article 465.2º TRLC introduces ex novo an additional cause of the TRLC: that a single creditor is found in the definitive list of creditors. The inclusion of this cause supposes the assumption of the criteria naturally accepted by the courts in ordinary practice. However, the question arises as to whether it would have been necessary to also introduce the lack of plurality of creditors as a cause for inadmissibility of the bankruptcy.
However, the majority opinion is that it continues to be an implicit bankruptcy budget, so the plurality of creditors - not credits - is necessary for its declaration. All this while also attending to the maxim that what is cause for termination must be inadmissible.
Among the novelties of the regulation of the rendering of accounts of the bankruptcy administration in the TRLC, it stands out that the times in which it must be carried out are regulated with much more clarity.
In turn, it contains a requirement for greater detail in its justifying part - detail of hours and personnel employed by the bankruptcy administration - which, although it will not affect the remuneration of this body, it does allow greater control by the judge of its performance efficient, and by the creditors of the actions actually and effectively carried out. There seems to be a certain distrust of the legislator in the due transparency of his actions.
Authors: María Del Mar Hernández Rodríguez and José María Blanco Saralegui
Fide, April 21, 2021
Summaries of previous sessions of the cycle:
- 1st session: The declaration of the contest and the budgets. The insolvency administration, January 27.
- 2nd session: The effects of the bankruptcy: on the debtor, on the shares, credits and contracts, Feb. 10.
- 3rd session: The active mass and the passive mass of the contest, February 24
- 4th session: The sale of productive units; reintegration and reduction of the mass; credits against the mass and payment order in case of shortage, March 9
- 5th session: The bankruptcy agreement, March 24
- 6th session: The liquidation of the active mass and the qualification of the contest, April 14