The debate on the exemption of public credit within the framework of the Second Chance Law (LSO) is experiencing a decisive moment.
The recent rulings of the Supreme Court - especially those STS 450/2025 (Plenary), STS 1055/2025 y STS 3865/2025 — have introduced relevant nuances that redefine the scope of the benefit of exemption from unsatisfied liabilities (EPI) vis-à-vis the Treasury and Social Security.
These pronouncements consolidate an interpretive change which places Spanish jurisprudence at an intermediate point between the absolute protection of public debts and their general exoneration.
Regulatory context and origin of the conflict
Since its incorporation into the Consolidated Text of the Bankruptcy Law (TRLC), the second chance mechanism has sought to offer insolvent individuals—business owners or not—a realistic way to restart after financial failure.
However, the big obstacle has always been the exclusion from public credit, provided for in the Article 489.5 of the TRLC, which establishes that certain credits, including those of public law and those derived from food, are not included within the scope of the exemption from unsatisfied liabilities.
This regulatory provision has been subject of intense controversy.
The general exclusion of public credits —without any margin for judicial assessment— significantly reduced the practical effectiveness of the second chance mechanism for those who had debts with the Tax Agency or the General Treasury of Social Security.
The issue was the subject of doctrinal and judicial debate, and also of interpretation by the Court of Justice of the European Union (CJEU), which In 2024, it considered it legitimate for Member States to limit the exemption of public credit, provided that they respect the principles of proportionality and effectiveness of the right to a second chance.
STS 450/2025 (Plenary): the turning point
La STS 450/2025, of March 20 (Plenary), marks a milestone in the jurisprudential evolution of the exoneration mechanism.
The Supreme Court has declared that the automatic exclusion of public credit violates the principle of proportionality and distorts the rehabilitative purpose of Directive (EU) 2019/1023.
The High Court considers that the Public Administration cannot automatically escape the exemption regime, and it is up to the judge to assess, in each case, whether it is appropriate to include all or part of the public credit in the EPI, especially when the debtor has acted in good faith and is subject to a payment plan.
STS 1055/2025: conditional exemption and the principle of proportionality
La STS 1055/2025, of April 18, delves into the line marked by the STS 450/2025 and develops the figure of the conditional exemption.
The Supreme Court establishes that public credits can be included in the EPI if three essential conditions are met:
- That the debtor has acted in good faith and has not committed any violations tributaries serious or repeated.
- That you have liquidated your assets or submitted a payment plan viable.
- That the inclusion of public credit does not substantially affect to the general interest in revenue collection.
Furthermore, the ruling introduces a criterion of material proportionality: it allows exonerating partially public credit, especially with regard to surcharges, interest or penalties, preserving the principal debt as non-exempt.
This balance between the State's tax-collecting function and the LSO's rehabilitative purpose creates a model that is more consistent with the European framework.
STS 3865/2025: Towards a unified interpretation in commercial courts
La STS 3865/2025, of September 9, consolidates this line by confirming that public credits can be subject to the judicially approved payment plan, without the Administration being able to automatically oppose it.
The Supreme Court emphasizes that when the judge approves a reasonable payment plan based on the debtor's good faith, Public credits are integrated into the same regime as private credits, except for expressly justified exceptional reasons.
This doctrine reinforces the role of the bankruptcy judge as guarantor of proportionality and avoids automatic procedures in both exclusion and exoneration.
Doctrinal interpretation: the balance proposed by practice
Recent jurisprudence is shaping a intermediate model, which rules out both the immutability of public credit and its indiscriminate release.
The result is an assessment of the debtor's conduct, the nature of the credit, and the impact on the general interest.
This view turns the exemption of public credit into a technical and argumentative exercise, rather than an automatic application of the law.
A new stage for the Second Chance
With Supreme Court rulings 450/2025, 1055/2025, and 3865/2025, the Supreme Court consolidated a more balanced interpretation of public credit in the Second Chance Law.
Public credit is no longer untouchable, but it is not automatically exonerated either. The key lies in the judicial assessment of the good faith, proportionality and purpose of the mechanism.
Bankruptcy practice is thus entering a mature phase: one in which rigorous legal advice—based on facts, not expectations—becomes the true "second chance" tool for both the debtor and the system.
RRYP Global, second chance law attorneys.
