Personal Insolvency Bill

What is the Draft Personal Insolvency Bill?

The Bill aims to radically reform our insolvency legislation by introducing new non-judicial debt settlement procedures and by significantly amending our existing Bankruptcy laws.

It is intended that the modernized regime will assist in differentiating between those who cannot repay their debts and those who are simply unwilling to repay their debts, with an appropriate and fair balance being struck between the rights of debtors and creditors alike. It is also hoped that the new reforms will lead to a significant decrease in the “bankruptcy tourism” phenomenon which has become increasingly popular in recent years and has been particularly visible in nearby Northern Ireland and the UK.

What will the changes mean?

Five key changes can be gleamed from the current Draft Bill:

1. Bankruptcy – The Bankruptcy Act 1988 will be the recipient of several important amendments, with such reforms including:
   • The reduction of the automatic discharge period from bankruptcy from 12 years to 3 years (subject to certain conditions);
   • The introduction of a minimum debt amount of €20,001 for creditor petitioned bankruptcy;
   • Provision for the delay of the discharge of bankruptcy by the Court for up to 8 years in circumstances of fraudulent/dishonest/non-cooperative behaviour by a bankrupt.
2. Insolvency Service – The Draft Bill makes provision for the establishment of a independent Insolvency Service which will operate the new non-judicial insolvency arrangements that are to be introduced. Three non-judicial debt settlement arrangements are to be established, their aim being to offer an alternative to bankruptcy and court involvement. The Settlement Arrangements are;
   • Debt Relief Certificates;
   • Debt Settlement Arrangements;
   • Personal Insolvency Arrangements;
   All three arrangements will be applicable to unsecured creditors. Personal Insolvency Arrangements will also allow for the settlement of secured debt (subject to certain conditions).
3. Debt Relief Certificates – The Draft Bill provides for a Debt Relief Certificate (“DRC”) which would allow for a full write-off of qualifying unsecured debt up to €20,000, subject to a one year moratorium, via the assistance of an approved intermediary. This procedure is designed for debtors who have little or no ability to pay their debts and applicants must specific eligibility criteria apply. Following on from the one year moratorium period, if the debtor has been unable to repay his qualifying debts, they will be deemed to have been discharged.
4. Debt Settlement Arrangements –The Bill allows for the proposal of a Debt Settlement Arrangement (“DSA”) for the repayment of an unsecured debt of €20,001 and above over a period of up to 5 years. The debtor may apply to the Insolvency Service for a Protective Certificate which, if granted, would provide a period of 30-40 working days during which creditors may consider the proposed DSA. As with a DRC, applicants for a DSA must comply with specific eligibility criteria.
5. Personal Insolvency Arrangements – The Personal Insolvency Arrangements (“PIA’s”) proposed by the Draft Bill will allow for the settlement of both secured and unsecured debt over a set period, where a debtors liabilities are between €20,001 and €3,000,000. A Personal Insolvency Trustee will make a PIA proposal to creditors, which if accepted by the creditors, will become binding and will be administered by the personal insolvency trustee. Again, applicants for a PIA must comply with specific eligibility criteria.

If you would like more information on the content of this Article or how the impending changes or insolvency services may affect you, please call us on 01-4900881.