One of the blocks of Royal Decree-Law 1/2015, dated 27 February (hereinafter, the “RDL”) envisages the implementation of urgent measures  to reduce the financial burden, introducing amendments mainly in the Insolvency Act, in Royal Decree-Law 6/2012, dated 9 March, concerning urgent measures to protect mortgage debtors without resources, and in Law 1/2013, dated 14 May, concerning measures to strengthen the protection of mortgage debtors, the restructuring of debt and low-income lease.

The Royal Decree-Law 1/2015 dated February 27, 2015 (the “RDL”) seeks to implement urgent measures to, among other things, reduce individual debtors’ financial burden.

Just six months after the last reform of the Law on Insolvency (Royal Decree-Law No. 4/2014 of 7 March) the Council of Ministers has promulgated a new amendment of the law with a view to facilitating, as far as possible, the continuity of financially viable businesses that become involved in insolvency proceedings.

These changes have been introduced by way of Royal Decree-Law No. 11/2014 of 5 September 2014 (the “Royal Decree-Law”).

The recently-approved Royal Decree Law 4/2014 (RDL), dated March 7 and published March 8 in the Official State Gazette (BOE), has the main goal of addressing measures to ensure the feasible restructuring of corporate debt, encouraging a relief of financial burdens for companies which, despite high debt levels, are still feasible from an operational viewpoint.

The U.S. Supreme Court in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, ___ S. Ct. ___, 2012 WL 1912197 (May 29, 2012), held that a debtor may not confirm a chapter 11 "cramdown" plan that provides for the sale of collateral free and clear of existing liens, but does not permit a secured creditor to credit-bid at the sale. The unanimous ruling written by Justice Scalia (with Justice Kennedy recused) resolved a split among the Third, Fifth, and Seventh Circuits.

On December 12, 2011, the Supreme Court granted a petition for certiorari in a case raising the question of whether a debtor's chapter 11 plan is confirmable when it proposes an auction sale of a secured creditor's assets free and clear of liens without permitting that creditor to "credit bid" its claims but instead provides the creditor with the "indubitable equivalent" of its secured claim. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166 (cert. granted Dec. 12, 2011).

The current economic recession has been particularly acute in one of the pillars of the national economy, the construction and real-estate sector. This sector, which had already been undergoing a slowdown in recent years following the so-called “real-estate boom”, now stands in a profound and particular crisis with sales coming to a standstill, caused not only by the overall market situation, but mainly due to the restrictions placed by banks on loans, which are putting an economic brake on entrepreneurs.  

Earlier this year, the United States Court of Appeals for the Eleventh Circuit decided in In re Lett that objections to a bankruptcy court’s approval of a cram-down chapter 11 plan on the basis of noncompliance with the “absolute priority rule” may be raised for the first time on appeal. The Eleventh Circuit ruled that “[a] bankruptcy court has an independent obligation to ensure that a proposed plan complies with [the] absolute priority rule before ‘cramming’ that plan down upon dissenting creditor classes,” whether or not stakeholders “formally” object on that basis.