What is the “Second Chance Act” for those who couldn’t pay off the credit card and got blocked

Former President Cristina Kirchner's proposal to create a "Second Chance Act" to relieve "vulnerable households" with "the rope around their necks" for debt reinstated in the public debate a legal tool that already has a concrete project in Congress since 2015.

The initiative, as described by the former president, seeks to create a "national program of personal debt relief" so that families can renegotiate their liabilities with fair rates and sustainable terms. What many do not know is that in 2015 then senators Liliana Negre de Alonso and Adolfo Rodriguez Saá introduced an almost identical bill.

What is the Second Chance Act?

It is a legal procedure designed specifically for individuals (not companies) who find themselves in a state of over-indebtedness, i.e., who cannot cope with the debts they incurred. The aim is to offer them a way out to clean up their economy, reorganize their liabilities and, in the most extreme cases, get the write-off of what they cannot afford to “start again”.

The bill that has been sleeping in Congress since 2015

The bill (S-2877/15) creates a “Small Debtors Overindebtedness Scheme”. This law is not for anyone, but defines as "small debtor" the person whose income does not exceed the twenty minimum wages and whose debts do not exceed 300% of his monthly income.

The initiative, which must be applied for by the debtor himself, proposes two main paths, provided that the "good faith" of the applicant is demonstrated:

Out-of-court conciliation: for cases considered "remediable". A negotiation instance is opened with the creditors to draw up a payment plan that cannot exceed seven years. If there is no agreement, a receiver may propose a plan with withdrawals, waivers or refinancing.

Personal restoration: for "irreparably compromised" cases, where there is no possibility of fulfilling a sanitation plan. In this instance, a judge orders the sale of the debtor’s assets to pay creditors. Once the assets are liquidated, the judge may declare “extinguished all debts” that failed to be covered. Creditors will no longer be able to claim that balance in the future.

Protection of home and other property

A key point of the project is the protection of assets essential to the life of the debtor. The law establishes that in the process of "Personal Restoration" can not sell (alienate) the immovable property, such as the headquarters of the person's work activity and, fundamentally, "the property of the debtor when it constitutes his only dwelling or home"

Inspiration in laws from other countries

As Cristina Kirchner mentioned, the idea is not new. The foundations of the 2015 draft explicitly cite legislation in France and Spain as models to follow, where this type of “debt forgiveness” laws for consumers has existed for years. The text argues that applying traditional bankruptcy law (meant for businesses) to an over-indebted consumer violates constitutional rights such as that of decent housing.