The Supreme Court (TS) in its ruling STS 995/2026 has ruled in favor of a Leonese pensioner who went into debt to be able to financially help his daughter and grandchildren during the covid pandemic. He has declared his bankruptcy proceedings fortuitous (and not guilty). The sentence thus revokes the resolutions of the Commercial Court number 8 of León and the Provincial Court that had considered that the man acted with serious negligence by accumulating various loans “impossible to return.”
The old man accumulated a debt of 20,242.05 euros to support his daughter, his grandchildren and his son-in-law who was having problems at work. All of them were affected by labor instability derived from the pandemic and the Temporary Employment Regulation Files (ERTE) in the hospitality sector.
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The man was collecting a retirement pension with a net annual income of 23,396 euros, which is equivalent to approximately 1,949 euros per month. Then he went to request bank financing through nine different entities. Among the creditors were Abanca, BBVA, Santander, Unicaja and Pepper Assets Services.
The Prosecutor’s Office considered that the retiree had sufficient income and did not need loans
The bankruptcy administration defended from the first moment that the bankruptcy had to be declared ‘fortuitous’ because there was no bad faith or malicious actions. But the Prosecutor’s Office maintained the opposite and argued that the pensioner had repeatedly resorted to external financing despite having sufficient income to cover his ordinary needs.
They asked that the contest be declared ‘guilty’ with a two-year disqualification from managing other people’s assets and with the obligation to respond for the liabilities generated. Both the commercial court and later the Provincial Court assumed this reasoning.
The Court held that with income close to 2,000 euros per month and expenses of 1,358 euros, the fact that he was requesting these loans was “immoderate and unjustified.”
“We are facing a couple of pensioner grandparents”
One of the phrases that stands out from the sentence is the one that refers to the situation of the two retirees. “We are in the presence of a couple of pensioner grandparents over 65 years old who have helped their children at a certain point by going into debt with more than 20,000 euros,” the text states.
Furthermore, it highlights the job instability of the daughter’s husband as a consequence of the ERTE that were carried out during the paideia. The First Chamber of the Supreme Court has corrected the previous criteria, concluding that the debtor’s behavior cannot be classified as intentional or seriously negligent.
The ruling emphasizes that the debt was not “scandalous” in relation to the pension received, highlighting that the money was used to cover the family’s basic needs in an extraordinary context caused by Covid. The court highlights that there were no “disproportionate or sumptuous” expenses.
Although the Supreme Court admits that the action was “not very prudent” in requesting loans without adequately assessing the future ability to repay, it considers that this is not enough to appreciate serious fault within the framework of the Bankruptcy Law.
The retiree appealed to the Second Chance Law
The ruling revolves around the so-called Second Chance Law, the legal mechanism that allows insolvent individuals to renegotiate or even cancel part of their debts when they act in good faith. The pensioner resorted to this procedure after accumulating more than 20,000 euros in loans requested to financially help his daughter, his son-in-law and his grandchildren during the pandemic.
The problem was that both the Prosecutor’s Office and the lower courts initially understood that the man had acted with “serious negligence” by borrowing beyond his means, which could prevent him from benefiting from the Second Chance. The Supreme Court, however, concludes that there was no fraud or bad faith, but rather debt motivated by basic family needs in an exceptional context caused by covid-19. That is why it declares the bankruptcy “fortuitous” and not “culpable”, a key difference to be able to access the debt relief mechanisms provided for in the law.