In February 2026, the Spanish Supreme Court delivered two rulings that radically change the treatment of public debt in second chance proceedings. Supreme Court Rulings (STS) 260/2026 and 254/2026 — both from the Civil Chamber — establish that surcharges, default interest and penalties imposed by the Spanish Tax Agency (AEAT) and the Social Security Treasury (TGSS) are subordinated claims and, as such, can be fully discharged within the framework of the Exoneración del Pasivo Insatisfecho (EPI). This doctrine represents the most significant advance for debtors with public debt since the reform introduced by Law 16/2022.
The problem the rulings solved
Before February 2026, a restrictive interpretation was widely applied by commercial courts: the discharge limits of Article 491 TRLC — up to €10,000 of AEAT debt and up to €10,000 of TGSS debt — applied to the entire public debt without distinction, whether principal, surcharges, interest or penalties. This interpretation left many debtors in an unsustainable position: after the second chance process, they still owed tens of thousands of euros to the tax authority, making the discharge largely illusory.
The case behind STS 260/2026 was paradigmatic: a sole trader from Murcia had accumulated €4,200 of Social Security principal plus €38,000 in late-payment surcharges and penalties on the same debt. The tax authority argued that the €10,000 ceiling applied to the total. The Supreme Court sided with the debtor.
First key ruling: surcharges, interest and penalties are subordinated claims
STS 254/2026 establishes with complete clarity the legal nature of the different components of public debt in insolvency proceedings:
- The principal of the tax debt or Social Security debt (quota, net tax liability) is an ordinary claim for insolvency purposes, unless it has a real guarantee
- Enforcement surcharges (5%, 10%, 20%) are subordinated claims under Article 281.1.4º TRLC, having a coercive-punitive character
- Default interest is a subordinated claim under Article 281.1.3º TRLC
- Tax and Social Security penalties are subordinated claims by statutory definition (Art. 281.1.4º TRLC)
This distinction is not new in the insolvency domain — it already existed in the treatment of claims — but the Supreme Court now applies it expressly to Article 491 TRLC: the public debt discharge limits refer only to the ordinary or privileged claims of the AEAT and TGSS, not to the subordinated ones.
Second key ruling: the Article 491 TRLC limits do not extend to subordinated claims
STS 260/2026 goes further and declares that Article 491.2 TRLC — which limits the discharge of public claims to the thresholds of €10,000 for AEAT and €10,000 for TGSS — must be interpreted restrictively: it applies to claims of an ordinary or privileged nature with the public treasury, not to subordinated claims.
The practical consequence is decisive. A concrete example:
Before the ruling: A debtor with €4,000 in Social Security principal + €38,000 in surcharges could only discharge €10,000 of the total public debt. Result: €32,000 remained after discharge.
After the ruling: The €4,000 principal is an ordinary claim, subject to the €10,000 ceiling — fully dischargeable. The €38,000 in surcharges is a subordinated claim — dischargeable in full without any ceiling. Result: all public debt potentially dischargeable.
Third key ruling: debt derivation does not bar second chance access
A third line of doctrine established in the 2026 rulings addresses a situation that affected many former directors and shareholders: the AEAT had derived corporate tax debts to them personally (under Article 43 of the General Tax Act), and several commercial courts had treated this derivation as an obstacle to accessing the second chance procedure on the grounds that the underlying debt was “professional” rather than “personal.”
The Supreme Court clarified that:
- Derivation of responsibility is a tax collection mechanism, not a judgment about the personal conduct of the debtor
- The derived debt retains its original nature (ordinary, subordinated) for discharge purposes
- The derived principal is subject to the €10,000 ceiling; the derived surcharges and penalties, being subordinated, are fully dischargeable
- The question of whether the derivation was correctly made by the AEAT is a separate matter to be litigated if appropriate — it does not affect the insolvency procedure
Practical implications by debtor profile
Sole trader with accumulated Social Security and tax debts
The most common profile: a sole trader who operated for several years, accumulated quarterly VAT and income tax debts plus Social Security contributions, and then ceased activity. In many cases, the accumulated surcharges and penalties exceed the original principal.
Under the new doctrine, the surcharges and penalties are fully dischargeable. If the debtor entered a second chance procedure before February 2026 and was denied discharge because of public debt, they may be able to request a review.
Former company director with derived tax liability
A director who was held personally liable for the company’s unpaid taxes under the derivation mechanism can now access the second chance procedure. The derived debt’s principal is subject to the €10,000 ceiling; the derived surcharges and penalties are fully dischargeable.
Debtor with disputed AEAT debt
If the debtor disputes the tax authority’s assessment — arguing the principal amount is incorrect — the insolvency procedure and the tax challenge can proceed in parallel. The insolvency court does not prejudge the merits of the tax dispute; it applies the discharge rules to the claim as quantified by the AEAT, subject to adjustment if the tax challenge succeeds.
The requirements for accessing the second chance procedure
The 2026 rulings expand the scope of discharge, but the access requirements remain unchanged:
- Good faith debtor: the debtor must not have been convicted of offences against property, economic crimes, tax fraud, Social Security fraud, labour law offences or fraudulent insolvency in the last ten years
- Prior negotiation attempt: the debtor must have attempted, in good faith, an out-of-court payment agreement (acuerdo extrajudicial de pagos) before applying to the court
- No prior discharge in the last ten years
- Non-culpable insolvency: the insolvency must not have been classified as culpable
How BMC can help
BMC’s insolvency and restructuring team, led by counsel Raúl Herrera García (member no. 79,836 of the Madrid Bar Association), advises debtors and their families on accessing the second chance procedure in the light of the 2026 Supreme Court doctrine. Our service covers:
- Initial assessment of the discharge potential for each component of the debt (principal, surcharges, penalties, interest)
- Preparation of the out-of-court payment agreement application
- Court representation throughout the EPI procedure
- Advice on the interaction between the second chance procedure and any pending tax challenges
If you have public debt — whether arising from your own activity or from a liability derived from a company — contact us for a first assessment. The 2026 Supreme Court rulings have materially improved the discharge prospects for many debtors who previously believed the second chance law was not available to them.
Raúl Herrera García is a lawyer, member no. 79,836 of the Madrid Bar Association (ICAM), specialist in insolvency and second chance proceedings at Herrera García Abogados, and Of Counsel at BMC.
