The Minister for Justice has published the long-awaited Personal Insolvency Bill aimed at reforming insolvency laws, some of which have been in place for over a century. Debt arrangements reached between borrowers and banks will be subject to court approval under the Personal Insolvency Bill. The Bill proposes the establishment of an independent body to be known as the Insolvency Service that will oversee the non-judicial personal insolvency system.
The Bill includes a number of new non-judicial debt resolution processes. To avail of one of these processes an individual will have to be insolvent-i.e unable to pay debts as they fall due. The proposals will have to be made through a Personal Insolvency Practitioner and can only be applied for once in a lifetime in relation to each procedure.
Debt Relief Notice (DRN)
A DRN will allow for the write-off of qualifying debt up to €20,000, subject to a three year supervision period; the terms to qualify are strict and the debtor will have to have a monthly disposable income of €60 or less after the provision of “reasonable” living expenses. They must hold assets of €400 or less, with the exemption of certain household appliances or tools needed for employment and one motor vehicle up to the value of €1,200. Debts that will qualify for a DRN would include Personal Loans, Bank Overdrafts, Credits cards etc. Debts that will not qualify for inclusion in a DRN include, Court Fines, Family Maintenance payments , Taxes and service charge arrears.
Debt Settlement Arrangement (DSA)
A DSA is available only in respect of unsecured debt and cannot be utilised to affect the rights of the holders of secured assets. A Personal Insolvency Practitioner must advise the debtor as to their options in regard to the insolvency processes, and assist in the preparation of the necessary Prescribed Financial Statement . Upon registration of a Protective Certificate there is a standstill period of 70 days ( which can be extended by another 40) during which creditors may not take action against the debtor. The DSA is then put to the creditors for agreement and requires the approval of 65% in value. If approved and no objection within 10 days there will be formal registration with the Insolvency Service and with subsequent court approval thereafter the DSA will come into effect. The Personal Insolvency Practitioner will then administer the DSA for its duration over a period of 5 years
Personal Insolvency Arrangement (PIA)
A PIA is available in respect of secure debt up to € 3 million (this limit can be waived by all creditors) and all unsecured debt. The debtor must owe a debt to at least one secured creditor. The debtor must apply for a Protective Certificate and upon registration there is a standstill period of 70 days (which can be extended by another 40). A PIA must be supported by at least 65% of creditors in value of actual votes cast and at least 50% of secured creditors and 50% of unsecured creditors in terms of value. When agreed it is binding on all creditors. The Personal Insolvency Practitioner will then administer the PIA for its duration over a period of 6 years.
The Bill also provides for a number of amendments to the Bankruptcy Act 1988 The main new provisions are as follows: • The new minimum amount for a creditor to petition for bankruptcy is €20,000.
• The automatic discharge from bankruptcy after 3 years from the date of adjudication (reduced from the current 12 years).
• Bankruptcies existing for 3 years or more at the time of commencement of the Act will be automatically discharged after a further six months have elapsed.
• The Official Assignee or a creditor may apply to the court to object to the discharge of a person from bankruptcy. The grounds for such an objection are that the debtor has failed to co-operate with the Official Assignee or has hidden or failed to disclose income or assets. The court may suspend the discharge pending further investigation or extend the period before discharge of the bankrupt up to a maximum of 8 years from the date of adjudication.
• Provision for a court to make a payment order requiring the discharged bankrupt to make certain payments in favour of creditors, allowing for reasonable living expenses for a period of up to five years.
• An extended timeframe of 3 years prior to petition from bankruptcy in regard to certain fraudulent transfers or settlements of assets or voluntary settlements of property.