The Irish Personal Insolvency Bill
The proposed heads for the new Personal Insolvency Bill were published by the Irish government on the 25 January 2012. The legislation aims to create an efficient non-judicial system of allowing people to resolve their debt problems by the creation of different schemes to manage and in certain circumstances write off all or some of the debtors debt.
It also proposes significant changes to the Bankruptcy legislation.
An Insolvency Service will be established to oversee and manage the different schemes and maintain an insolvency register.
The new procedures are:
1 a Debt Relief Certificate;
2 a Debt Settlement Arrangement; and
3 a Personal Insolvency Arrangement;
Debt Relief Certificates An application for a debt relief certificate can be made by a debtor in respect of unsecured debts less than 20,000.00. The debtors must have (1) no assets (assets or savings worth less than 400.00); (2) no income, (an available disposable income of 60 or less per month); and (3) the debt must be a qualifying debt, (unsecured credit card debt; overdraft facility or other unsecured bank loan).
The effect of the issue of a certificate will be that a moratorium period of one year shall apply during which no proceedings may be taken to enforce the specified debts. The debtor will have ongoing obligations during this period in respect of his personal circumstances and income. A creditor is permitted to object to the granting of a certificate during the moratorium period. At the expiry of the moratorium period the qualifying debts will stand to be fully discharged.
Debt Settlement Arrangements
This provides for a debtor who is insolvent and has unsecured debts in excess of 20,000 to propose an arrangement with two or more of his creditors in respect of the payment of same. The proposal must contain options for creditors to be paid or satisfied in part of full, for example by making a lump
sum payment or by transferring assets.
A protective certificate may be issued by the Insolvency Service to a debtor while the proposals are being made. A meeting of creditors will be convened by a personal insolvency trustee who has agreed to act. In order to approve an arrangement a majority of 65% of the value of actual votes cast a meeting of creditors must be obtained. Once a debt settlement arrangement is registered no creditor can present a bankruptcy petition against the debtor or commence legal proceedings for the recovery of their debt. A debt settlement arrangement will apply for a period of five years.
At the end of this period the remainder of the debts covered will stand discharged in full.
Personal Insolvency Arrangements
These arrangements will apply to debtors who are insolvent but have the means to make part payments to creditors over a number of years. The debts must be above 20,001.00 and below 3million and it must be unforeseeable that the debtor will become solvent in the following five years.
The debt may be secured or unsecured. An application can be made to the Insolvency Service for a protective certificate. The proposal for an arrangement will involve terms providing for the discharge in full or in part of the liability of the debtor including the payment of a lump sum; a payment
arrangement or another option to satisfy the debtors debts.
The trustee will consider submissions from creditors and prepare a proposal for the arrangement. In order for a personal insolvency arrangement to become binding it must be passed by:65% of the value of the votes cast by creditors in a meeting (both secured and unsecured); andeither 100% of the secured creditors; or a majority of 75% in value of actual votes cast at the meeting of secured creditors and 55% in value of actual votes cast a meeting of unsecured creditors.The maximum duration of the period within which the obligations under the arrangement are to be performed is six years. At the expiry of this period the debtor will be discharged from the remainder of the unsecured debts covered in the arrangement and the secured debts to the extent that they are dealt with in the arrangement.The debtor will not be required to cease to occupy his home or dispose of his interest in his principle private residence unless certain criteria are met such as the costs of remaining in the home are in the opinion of the personal insolvency trustee disproportionate.A debtor and the personal insolvency trustee will have regular contact during the period of the arrangement so that the trustee can ensure its terms are being adhered to.BankruptcyThe reforms to the law surrounding bankruptcy include the introduction of a minimum debt amount of 20,001 before a creditor can petition for bankruptcy and the automatic discharge from bankruptcy after three years from adjudication amended from its current twelve years. For any person who iscurrently bankrupt this change also applies to them.Discharge from bankruptcy after three years will be subject to certain conditions and ongoing obligations of the debtor and can be delayed by the court up to a maximum of eight years for noncompliance by the debtor or for fraudulent or dishonest behaviour, including fraudulent transfers or settlements of assets.ConclusionThe new Bill proposes significant reform in the area of personal insolvency and should be of particular interest to debtors who may be able to avoid bankruptcy, Solicitors or other judicial proceedings against them by entering into one of the alternative schemes.by: Solicitors Dublin