The tax agency and social security oppose discharging your debt

The case, in five lines

What is brought

Answering the public creditors' objections within the discharge proceedings and, where necessary, appealing the order that accepts them.

Before which court

The sección de lo Mercantil of the Tribunal de Instancia (the commercial division of the first instance court) hearing the insolvency case rules on discharge; the Audiencia Provincial (the provincial appellate court) decides any appeal against the order.

Deadline

Ten days to make submissions from the moment the application or the proposed payment plan is served on the creditors on the record and on the insolvency administrator. Twenty days from service to appeal the order.

Who can bring it

The individual debtor who has applied for discharge. On the other side, submissions come from the insolvency administrator and the creditors on the record, including the Spanish tax agency and the social security treasury.

Financial risk

If the restrictive reading prevails, you leave the insolvency case still carrying live and enforceable public debt, with surcharges and interest still running. A dismissed appeal may carry an order to pay costs.

The ten thousand euro cap is not a single one shared by both bodies

Article 489.1 TRLC begins by stating that discharge extends to all unpaid debts except those it lists. Paragraph 5 places public law claims among the exceptions, but immediately introduces an exception to the exception: debts whose collection falls to the Agencia Estatal de Administración Tributaria (the Spanish tax agency) may be discharged up to a maximum of ten thousand euros per debtor.

The next sentence is the one that decides your case: likewise, social security debts may be discharged for the same amount and on the same conditions. For the same amount, not within the same amount. The provision sets a cap and then replicates it for the other public creditor, with its own bracket mechanics.

That is why an objection treating the ten thousand euros as a single quota to be split is reading the text backwards. Where the debt owed to each body comfortably exceeds the cap, as in the example of 14,000 and 11,000 euros, the difference between the two readings is exactly ten thousand euros of live debt.

The first five thousand euros are wiped in full and the rest only by half

That same paragraph 5 spells out how the amount is calculated: for the first five thousand euros of debt discharge is total, and above that figure discharge reaches fifty per cent of the debt up to the stated maximum. It is a bracketed calculation, and getting it wrong costs real money.

Applied to a debt of 14,000 euros owed to the tax agency, the first five thousand are discharged in full and fifty per cent of the remainder is then discharged, always subject to the ten thousand euro ceiling on the amount actually discharged. The calculation is made on that creditor's own debt, item by item, and not on the aggregate of all the debtor's public liabilities taken together.

That is why the written submission does not argue in the abstract: it produces each body's certified breakdown and does the arithmetic in front of the judge. An objection that simply asserts that public law debt cannot be discharged ignores an express clause in the very provision it relies on.

The reverse ranking order decides which specific part of your debt is wiped

Paragraph 5 closes with an allocation rule that is rarely argued and almost always matters: the discharged amount, up to that limit, is applied in reverse order to the ranking laid down by the statute and, within each class, according to seniority. You do not choose what gets wiped: the classification of the claim decides it.

That means the cap is consumed starting from the lowest ranking claims within that body's debt, and within each class from the oldest of them. How each item is classified in the list of creditors, and what date it carries, stops being a formality and becomes the single factor that determines the economic outcome of the discharge for you.

Hence the defence starts with the list of creditors, not with the administration's objection. If an item is misclassified or misdated, the allocation goes wrong and the cap is exhausted in the wrong place, leaving alive precisely the part of the debt that weighs most. Arguing the classification and the seniority of each item in time is worth as much as arguing the cap itself.

The objection is answered within ten days, not once the order arrives

Under the payment plan route, article 498.1 TRLC requires the proposal to be served on the creditors on the record so that within ten days they may make whatever submissions they see fit on whether the conditions and requirements for discharge are met, or on the plan itself. That is when the tax agency and the social security treasury write in.

Under the liquidation route, article 501.4 TRLC sets out the same scheme: the court clerk serves the debtor's application on the insolvency administrator and on the creditors on the record so that, within ten days, they may make whatever submissions they see fit regarding the granting of discharge. The same ten day window, the same creditors, and the same need to reply with figures rather than with arguments.

Article 498.2 adds that, once submissions are filed or the period has run, the judge checks the requirements and grants or refuses. In other words, the record closes there. Answering the public debt calculation at that point, with certificates and the list of creditors to hand, avoids having to correct it later on appeal.

With public law debt there is only one shot, and this is it

Article 489.3 TRLC is blunt: public law debt is dischargeable in the amount set out in the second paragraph of subsection 1.5, but only in the first discharge of unpaid liabilities, and no amount at all is dischargeable in any later discharge the same debtor may obtain. There is no second run at public debt.

Article 488.3 confirms it from the other side: fresh applications for discharge of unpaid liabilities never reach public law debt. Read together, giving up ten thousand euros today by accepting the administration's reading without argument is not a minor adjustment: it is waiving a band that will not come back.

It is also worth keeping in mind what stays out in any event. Article 489.1 also excludes fines imposed in criminal proceedings and very serious administrative penalties, civil liability arising from a criminal offence, and the costs and court expenses of the discharge application itself. Those are out, cap or no cap.

How we run the case, step by step

1. 1

   Certifying and breaking down each body's debt

   We obtain separate certificates from the Spanish tax agency and the social security treasury, itemising principal, surcharges and interest and the accrual date of each item. Without that breakdown neither the bracket rule nor the reverse order rule can be applied.

2. 2

   Reviewing how the claims are classified in the list of creditors

   We check the class each public item sits in, because the discharged amount is allocated in reverse ranking order and, within each class, by seniority. A misclassified item shifts the cap towards the wrong place.

3. 3

   Calculating the dischargeable amount creditor by creditor

   We run two independent calculations, one for the tax agency and one for social security, with the five thousand euro band discharged in full and fifty per cent up to the ten thousand maximum. The result goes to the court as figures, not as a thesis.

4. 4

   Filing the reply within the ten day period

   We answer each administration's submissions with the certificates and the calculation, expressly request discharge for the resulting amount, and put the applicable allocation rule on the record so that the order does not rule in one undifferentiated block.

5. 5

   Appealing if the order adopts the restrictive reading

   If the order narrows the discharged perimeter, there are twenty days from service to lodge an appeal before the Audiencia Provincial, setting out in that document every argument and each ruling challenged, band by band.

The law that applies

• Art. 489 TRLC. Extends discharge to all unpaid liabilities save the listed exceptions, places public law debt among them and then allows up to ten thousand euros per debtor of tax agency debt to be discharged, in full for the first five thousand and at fifty per cent for the rest, with an identical amount and conditions for social security, allocated in reverse ranking order. Only in the first discharge. BOE-A-2020-4859
• Art. 498 TRLC. Requires the proposed payment plan to be served on the creditors on the record so they may make submissions within ten days on the requirements for discharge or on the plan, and empowers the judge, once submissions are in or the period has run, to grant or refuse discharge provisionally with whatever changes are considered appropriate. BOE-A-2020-4859
• Art. 501 TRLC. Regulates the discharge application after liquidation of the estate and in cases with no estate, setting the deadlines to file it, the duty to state that no disqualifying ground applies, and service on the insolvency administrator and the creditors on the record for ten day submissions. BOE-A-2020-4859
• Art. 488 TRLC. Requires two years from final discharge before a fresh application following a payment plan discharge, and five years from the granting decision where the estate was liquidated, and states that fresh applications never reach public law debt. BOE-A-2020-4859
• Art. 458 LEC. Sets twenty days from service to lodge the appeal before the court competent to hear it and requires the appellant to set out, in that same document, the arguments grounding the challenge and the rulings being challenged. BOE-A-2000-323

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

Frequently asked questions