Law firm guidesInsolvency and debt relief

Debt relief refused because you are not a good faith debtor

Last updated 2026-09-01 · Reviewed by Jaime Piñeira Pardo, registered with the ICAM bar, no. 138826

The short answer

The order refusing to discharge your unpaid debts is fought through an appeal, lodged within twenty days of service and decided by the Audiencia Provincial (the provincial appellate court). Good faith is not the judge's impression: article 487 of the TRLC (the consolidated Spanish Insolvency Act) lists the circumstances that bar discharge, and the appeal must show that none of them applies to you.

You liquidated what you had, the insolvency case was closed and you asked for the 180,000 euros still outstanding to be discharged. The administración concursal (the court appointed insolvency administrator) did not object. A bank did: it argued that you had taken out three loans in the four months before you stopped paying and that this was reckless. The order accepts that argument in two paragraphs, calls you a negligent debtor and leaves the whole debt standing. Nobody looked at what financial information you gave the bank or at why your business collapsed. You have twenty days.

The case, in five lines

What is brought: Appeal against the court order refusing the discharge of unpaid debts.
Before which court: The order comes from the sección de lo Mercantil of the Tribunal de Instancia (the commercial division of the first instance court) handling the insolvency case, and the appeal is decided by the Audiencia Provincial (the provincial appellate court), before which it is lodged under article 458.1 of the LEC (the Spanish Civil Procedure Act).
Deadline: Twenty days from service of the order, under article 458.1 LEC. Once that period expires the order becomes final and the entire debt revives against you.
Who can bring it: The individual debtor whose discharge has been refused, who is the party burdened by the order. A creditor harmed by the decision may also appeal.
Financial risk: If the appellate court dismisses the appeal, the order becomes final, the debt stays alive and you may be ordered to pay the costs of the appeal. Winning does not wipe out everything either: public law debt is discharged only within the cap set by article 489 TRLC.

The grounds that bar discharge are a closed list, not a moral judgement

Article 486 TRLC states that an individual debtor, whether or not a business owner, may seek discharge provided they are a good faith debtor, and offers two routes: under a payment plan with no prior liquidation of the estate, or with liquidation of the estate. Good faith is not defined there with adjectives: it is defined by exclusion in the next article.

Article 487.1 TRLC lists six circumstances and only six: a final criminal conviction in the previous ten years for certain offences, a final administrative penalty for very serious tax infringements or a final derivation of liability decision, an insolvency declared culpable, having been named a person affected by the culpability judgment in a third party's insolvency, breach of the duties of cooperation and information, and having supplied false information or acted recklessly or negligently when incurring the debt.

That changes how the appeal is written. You do not appeal by saying you are a decent person: you appeal by identifying which of the six paragraphs the order applied and showing that the factual basis of that specific paragraph is absent. An order refusing discharge without anchoring itself in one of those six paragraphs is refusing on a ground the statute does not contemplate.

If you are accused of reckless borrowing, the judge had four things to weigh

Paragraph 6 of article 487.1 is the one most often used against the debtor and the one worst reasoned. It covers anyone who supplied false or misleading information or acted recklessly or negligently when incurring the debt or when meeting their obligations, even where that did not lead to a culpable insolvency ruling. It is a wide basket, but the statute itself narrows it.

That same paragraph imposes four mandatory assessment factors on the judge: the financial information the debtor gave the lender before the loan was granted for the purposes of assessing solvency, the debtor's social and professional level, the personal circumstances of the over indebtedness, and, for business owners, whether they used the early warning tools made available by the public administrations.

That is where the appeal lives. If the bank granted three loans without assessing your solvency and you hid nothing, the first factor works for you, not against you. If you are not a financier but a bricklayer or a waiter, so does the second. If the debt exploded because of illness, a separation or the loss of your only client, the third explains the over indebtedness without any need for blame. An order that mentions none of the four is incomplete.

A culpable insolvency caused only by late filing does not close discharge

Article 487.1.3 TRLC excludes from discharge anyone whose insolvency has been declared culpable, but immediately introduces a valve that almost nobody invokes: where the insolvency was declared culpable solely because the debtor failed to file for insolvency in time, the judge may take into account the circumstances in which the delay occurred.

In other words, the delay admits of an explanation and the explanation is arguable on appeal. Open negotiations with creditors, a refinancing that looked viable, an illness, the belief that the main client was about to pay: all of that goes to the circumstances of the delay, and the judge is required to consider it, not merely to note the date on which the insolvency was filed.

Paragraph 2 of the same article adds a sequencing rule useful for overturning premature decisions: where the exclusion rests on a culpability ruling, your own or a third party's, that is not yet final, the judge must stay the decision on discharge until that ruling becomes final. Refusing before finality is refusing against the wording of the statute.

The notice of appeal is the only place where your arguments fit

Article 458.1 LEC, in the wording in force since 20 March 2024, requires the appeal to be lodged before the court competent to hear it, within twenty days of service of the challenged decision, attaching a copy of that decision. It is no longer lodged before the body that issued the order.

Paragraph 2 is what decides cases: in the notice of appeal the appellant must set out the arguments on which the challenge is based, as well as identify the decision appealed and the specific rulings challenged. There is no later brief in which to develop the reasoning. Whatever is not in that document will not be argued.

After that the machinery is fixed: the court clerk requires the body that issued the order to send the file up, summoning the non appealing parties to appear before the appellate court within ten days. No appeal lies against the decision holding the appeal to be lodged, but the respondent may argue its inadmissibility when opposing it.

Winning the appeal does not wipe out the whole tax and social security debt

Article 489.1 TRLC excludes from discharge, among others, non contractual liability debts for death or personal injury, liability arising from a criminal offence, maintenance debts, certain wages for the last sixty days worked, criminal fines and very serious administrative penalties, the costs and court expenses of the discharge proceedings themselves, and secured debts within the limit of their special privilege.

Public law debt has its own rule in paragraph 5: debts whose collection falls to the Agencia Estatal de Administración Tributaria (the Spanish tax agency) may be discharged up to ten thousand euros per debtor, in full for the first five thousand and at fifty per cent for the next band, and social security debts may be discharged for the same amount and on the same conditions.

And paragraph 3 warns of something worth knowing before appealing: public law debt is dischargeable in that amount only in the first discharge of unpaid liabilities, and no amount at all is dischargeable in any later discharge the same debtor may obtain. That is why the appeal is framed knowing that more than this single order is at stake.

How we run the case, step by step

1
Reading the order and the full insolvency file
We identify which of the six paragraphs of article 487.1 the order applies and on what facts it rests. We cross check it against the insolvency administrator's report and the creditors' submissions, because the order often adopts a version that no document in the file supports.
2
Reconstructing how each loan was granted
We gather the financial information you gave each lender and what the lender did with it. If there was no solvency assessment, the first factor of article 487.1.6 stops being a reproach against you and becomes evidence against the creditor that opposed the discharge.
3
Lodging the appeal within the twenty days
The document is lodged before the Audiencia Provincial with a copy of the order, identifies the rulings challenged and develops every argument, because there will be no second chance to argue. We expressly ask for discharge to be granted, not merely for the order to be set aside.
4
Creditors' response and appearance in the appeal
The creditors on the record oppose the appeal and may argue that it is inadmissible. We answer their submission, monitor the sending up of the case file and, where appropriate, request the missing documentary evidence so that the appellate court decides on a complete record.
5
The appellate judgment and its effect on the debt
If the appellate court upholds the appeal, discharge is granted under article 486 TRLC and the corresponding notices and publicity are issued. We review which creditors fall outside the perimeter discharged by article 489 and decide what to do about them.

The evidence that decides the case

The loan applications and the financial information you supplied, together with the lender's response, to prove there was no false or misleading information.
The personal income tax returns for the last three tax years, yours and those of the other members of your household, which are the ones the statute requires to accompany the application.
The insolvency administrator's report and its position on discharge, which in many cases raised no objection and contradicts the creditor that did.
The culpability ruling in the insolvency case and proof of whether it is final, because whether the judge could decide or had to stay the decision depends on it.
Certificates from the Spanish tax agency and the social security treasury on final penalties and derivation of liability decisions over the last ten years.
The medical, employment or family records explaining the origin of the over indebtedness, which is one of the four mandatory assessment factors.

What closes the door

Letting the twenty days run while waiting for the court to clarify something. The period is not interrupted by badly framed clarification requests, and the order becomes final with the whole debt alive.
Saving arguments for a later hearing. Article 458.2 LEC requires the notice of appeal to set out the arguments grounding the challenge, and what is not there will not be examined.
Appealing in the abstract, claiming general good faith without attacking the specific paragraph of article 487.1 the order applied. The list is closed and the appeal has to dismantle the ground actually invoked.
Having failed to disclose an account, an income stream or an asset to the insolvency administrator. Breach of the duties of cooperation and information is on its own one of the six exclusion grounds.
Counting on applying again later without factoring in that public law debt is dischargeable only in the first discharge, and in later ones no amount at all is dischargeable.

The law that applies

Art. 487 TRLC. Lists in six paragraphs the circumstances that bar discharge and requires the judge, in cases of reckless or negligent borrowing, to weigh the financial information given to the lender, the debtor's social and professional level, the circumstances of the over indebtedness and the use of early warning tools. Where the culpability ruling is not final, the decision is stayed. BOE-A-2020-4859
Art. 486 TRLC. Allows an individual debtor, whether or not a business owner, to seek discharge of unpaid liabilities provided they are a good faith debtor, either under a payment plan without prior liquidation of the estate or with liquidation of the estate. BOE-A-2020-4859
Art. 458 LEC. Sets a twenty day period from service to lodge the appeal before the court competent to hear it, requires the document to set out the arguments and the rulings challenged, and regulates the sending up of the file and the ten day summons to the non appealing parties. BOE-A-2000-323
Art. 489 TRLC. Extends discharge to all unpaid liabilities except a listed set of exceptions, and caps public law debt at ten thousand euros per debtor for tax agency debts plus the same amount, on the same conditions, for social security, available only in the first discharge. BOE-A-2020-4859
Art. 488 TRLC. Requires at least two years from final discharge before a fresh application following discharge under a payment plan, and at least five years from the granting decision where discharge came with liquidation of the estate. Fresh applications never reach public law debt. BOE-A-2020-4859

Each article checked against the consolidated text published in the BOE (the Spanish official gazette).

Frequently asked questions

What does being a good faith debtor actually mean

It is not a moral assessment. Article 486 TRLC requires good faith and article 487 defines it by exclusion: a good faith debtor is one who is in none of the six listed circumstances that provision sets out. The argument is therefore never about whether you are an honest person, but about whether the specific ground the order attributes to you exists and is supported by the file.

My discharge was refused because the insolvency was declared culpable, can anything be done

It depends on the ground of culpability and on whether it is final. If the insolvency was declared culpable solely because you did not file in time, article 487.1.3 lets the judge take into account the circumstances of the delay, and those circumstances can be proved and argued. And if the culpability ruling is not yet final, article 487.2 requires the decision on discharge to be stayed, not refused.

The bank says I borrowed knowing I could not repay

That accusation falls under article 487.1.6, and the provision itself dictates how it is examined. The judge must weigh the financial information you gave the lender before the loan for the purpose of assessing solvency, your social and professional level, the personal circumstances of the over indebtedness and, for business owners, whether you used the early warning tools. A bank that lent without assessing anything produces evidence against its own argument.

If I win the appeal, is my tax and social security debt cancelled too

Only in part. Article 489.1.5 TRLC allows up to ten thousand euros per debtor of debts collected by the Spanish tax agency to be discharged, in full for the first five thousand and at fifty per cent for the rest of the band, plus the same amount on the same conditions for social security debt. Paragraph 3 reserves that possibility for the first discharge.

How many times can discharge be obtained

The statute does not forbid it but spaces it out. Article 488 TRLC requires at least two years from final discharge before a fresh application where the earlier one came under a payment plan, and at least five years from the granting decision where it came with liquidation of the estate. In addition, fresh applications never reach public law debt.

This guide explains how the action works in general. It does not replace the study of your own case: deadlines depend on when things happened and on what you have done since.