The CJEU confirms that a second chance may be denied to debtors declared “affected persons” in wrongful insolvency proceedings

The case resolved by the CJEU (judgment of 10 April 2025, case C-723/23) concerns a joint administrator of two companies in insolvency proceedings who was declared an “affected person” in both of the wrongful insolvency qualifications of those companies. He was held jointly and severally liable for the insolvency shortfall and disqualified from managing third-party assets. Later, when he applied for a debt discharge himself, the tax administration opposed the request by invoking the legal exception.

The Commercial Court of Oviedo referred a preliminary question to the CJEU, considering that such an exception could be contrary to Directive (EU) 2019/1023 on preventive restructuring frameworks, insolvency and second chance, which promotes broad access to second chance mechanisms. The issue was that Spanish law does not allow the judge to assess whether the debtor acted in good faith, since the exception is automatic and objective.

The CJEU confirmed that such an exclusion does not violate EU law, provided it is justified under national law and serves a legitimate public interest. According to the CJEU, if a debtor was declared an “affected person” for harming the creditors of a company, they can legitimately be denied debt relief, as they would not be acting in good faith towards either their own creditors or the company’s.

This decision reinforces the validity of Spanish insolvency law, although it leaves it up to national courts to determine, in each specific case, whether the application of the exception is justified based on the existence or absence of a public interest.

In summary, the CJEU supports the possibility of restricting access to the second chance mechanism in cases involving responsibility for third-party wrongful insolvency, as long as the restriction is reasonable, proportionate, and established in national legislation.

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