Bill to ease mortgage debt and give debtors a second chance

Automatic summary, not yet reviewed

1. The bill would limit new mortgages on a primary home: a maximum term of 30 years and an amount of no more than 90% of the appraised value (100% for publicly protected housing). It would also require informing consumers about the risks and cap late-payment interest.
2. If the debtor believes the mortgage contract contains abusive clauses, they could oppose the foreclosure and, if they file a lawsuit within 20 days, the judge could suspend the foreclosure until that case is decided.
3. It creates an out-of-court process to settle the debts of people at risk of losing their primary home. A regional over-indebtedness commission handles a payment plan, which may include handing over the home in payment, and opening the process suspends the foreclosure and late-payment interest.
4. It amends the Insolvency Law to create a simplified insolvency process for individuals with debts from their primary home. If the requirements are met, the judge can discharge the remaining debts after a monitoring period of up to five years: the so-called second chance.
5. At auctions of a primary home, minimum bids would have to reach at least 80% of the appraised value, and the creditor could only be awarded the home at that percentage or at the total debt if it is higher.
6. The Government would have to introduce bills so that handing over the home in payment is not taxed as a capital gain under personal income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings., and to grant a 99% rebate on the tax on the increase in urban land value in these cases.

Who it affects

• Individuals and families with mortgage debts on their primary home who risk losing it: They could use the out-of-court debt settlement process and, if they meet the requirements, have remaining debts discharged.
• People taking out a mortgage on a primary home in the future: Limits on loan term and amount would apply, and they must be informed of the risks.
• Financial institutions: They would face restrictions on granting mortgages, and foreclosures could be suspended if there are abusive clauses.
• Autonomous communities (regional governments): They must create and regulate the over-indebtedness commissions in their territory.
• People who have already lost their home through foreclosure: Authorities must give priority to housing measures for them.

Words worth knowing

Dación en pago

Handing the home over to the bank to settle the mortgage debt.

Ejecución hipotecaria

Foreclosure: the court process by which the home is auctioned or awarded to the creditor when the mortgage is not paid.

Exoneración del pasivo pendiente

A judge releasing the debtor from the debts they could not pay.

Concurso (concursal)

Insolvency proceeding: a court process to manage the debts of a person or company that cannot pay them.

Cláusula abusiva

A contract term that unfairly harms one party, usually the consumer.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the text as it was introduced. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries