On 18 February 2026, the Supreme Court issued a series of rulings that are particularly relevant for all individuals who are considering taking advantage of the Second Chance mechanism.

These rulings clarify, for the first time and in detail, which debts to the public authorities can be cancelled and which cannot, as well as better defining one of the causes established in the law that prevented obtaining such exemption
(derivation of liability), thus providing stability and legal certainty in an area that had previously generated much confusion.

Since the reform of Law 16/2022, the confusion and legal uncertainty of all parties involved in the insolvency proceedings of individuals (debtors, creditors, lawyers, etc.) has been at its highest, as depending on the mercantile judge hearing your case, they could understand that the exemption from public debt was limited to a maximum of €10,000, only applicable to the (AEAT) (Spanish Tax Agency) and the (TGSS), (Spanish Social Security), or that it also extended to all types of public administrations or, even in the most extreme cases, that no limit could be applied, and that everything was exempt because the limitation was not adequately justified by the legislator, on the understanding that it contravened the European directive.

Well, the Supreme Court has now settled this uncertainty by establishing clear criteria from this point onwards.

Firstly, the High Court confirms that the Spanish system — which limits the amount of public debt that can be forgiven — is compatible with European regulations. The Court of Justice of the European Union had already indicated that each country can decide which debts it considers exemptible provided that there are compelling reasons, and the Supreme Court understands that in Spain such reasons exist: public revenues support essential services such as health, education and pensions, and their protection is a structural issue.

However, the Court has introduced, or rather interpreted, two issues of utmost importance:

1.All public administrations—not only the Tax Agency and Social Security, as indicated in the wording of the regulation—may see their credits affected by the exemption, either totally or partially depending on their nature. In other words, local councils, autonomous communities, provincial councils and any public entity are included.

2.So-called subordinated public claims — such as late payment surcharges, interest on delays or penalties — may be fully exempted and do not count towards the maximum limit of €10,000.

Therefore, public debts considered ordinary or privileged by any public administration cannot be fully exempted, but any exemption will be limited to a maximum of €10,000, according to the brackets established by law.

Finally, the Supreme Court has also taken the opportunity to establish an obiter dicta criterion (as it was not the subject of the appeal) regarding the debt that will be exempted. It thus rejects generic resolutions and requires the applicant to clearly and comprehensively detail which debts they wish to have exempted. This is intended to avoid errors, omissions and subsequent litigation, as judges must specify in the final resolution which debts are exempted and which are not.

It is true that this precision in the list may mean greater transparency for both the debtor and the creditor, avoiding confusion in ongoing proceedings or even in subsequent claims. However, we must not forget that it is sometimes difficult to obtain information on the exact amount of the debt (both from the debtor and the creditor), and that claims such as interest and legal costs are sometimes not determined, as they are pending final settlement. Perhaps it would be sufficient to identify the claims in terms of loan numbers, concept and so on, with any amount accrued (whether principal or ancillary) being subject to exemption. We will see how commercial judges apply this requirement agreed by the Supreme Court.

Likewise, as we mentioned earlier, judgments 259/2026, 261/2026, 262/2026 and 263/2026, all dated 18 February, establish a clear and defined criterion that having been subject to (and not having paid) a transfer of liability in recent years does not automatically entail the loss of the debtor’s right to exemption. To this end, the agreement to transfer liability must prove fraudulent conduct on the part of the debtor that is similar to a very serious offence, i.e., negligent or fraudulent conduct.

In short, the Supreme Court brings order, clarity and more predictable rules of the game with regard to credits subject to exoneration, without prejudice to the fact that the Insolvency Law and its application are always subject to constant evolution in their criteria.

The insolvency law department at Marroquín Abogados has specialists in restructuring and insolvency who can advise you on the Second Chance mechanism.