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Personal Insolvency Bill 2012

At lunchtime today the Minister for Justice, Equality and Defence published the much-awaited Personal Insolvency Bill.

Reddy Charlton Solicitors contributed to the consultation process on the Bill with the Department both directly and as part of the submission made by the Law Society of Ireland.  We were accordingly invited as one of the stakeholders to a briefing on the Bill from the Department.  

The Minister had previously published, for consultation purposes, a draft scheme of the bill.  The basic architecture of that scheme has been preserved. 

New Procedures 
 
The bill provides for a number of non-judicial procedures for dealing with personal insolvency and also reforms the law of bankruptcy.  The non judicial procedures are:-

  • Debt Relief Notice (DRN)
    This allows for the write off of unsecured debt of up to €20,000.  This is intended for individuals with no significant assets or income.  Court approval is required in order to deal with constitutional concerns, but such approval will be a formality unless there are exceptional grounds for objection.  At the end of a three-year surveillance period, the unsecured debt is written off.
  • Debt Settlement Arrangement (DSA) 
    This is a framework for the agreed settlement of unsecured debt over a five-year period.
  •  Personal Insolvency Arrangement (PIA) 
    This provides a mechanism for the agreed settlement of secured debt up to a cap of €3,000,000 and unsecured debt over six years.  The fact that a PIA can impact on the rights of a secured creditor is a major change in our law.

Bankruptcy

The major change is that the period of bankruptcy is reduced from 12 years to 3 years for automatic discharge.  At the end of that period, all of the assets of the bankrupt are lost to his or her creditors but as against that all of the debts are discharged.

Further Alerts

We will be analysing the draft bill in greater detail and will be sending you further alerts. Broadly speaking the bill follows the scheme.  
 
Secured Creditors

The major change of significance relates to the rights of secured creditors under a PIA.  The proposals under a PIA must be approved by 65% in value of all of the creditors (secured and unsecured) attending and voting at a meeting of creditors.  Under the old scheme,approval of 75% of secured creditors was also required.  This has been significantly changed.  Now, all that is required is 50% support by secured creditors.  In addition, the value of the debt that is taken into account is the lesser of the amount of the debt or the value of the security.  Accordingly in the case of those in negative equity the bank would be entitled to votes equivalent to the value of the property secured. 
 
Banks had already indicated they were unhappy with the previous provisions.  It will be indeed very interesting to see their reaction to these less favourable proposals.

Legislative Time—line
 

The Minister intends that the second stage debate should start in the Dáil next week and hopes for conclusion of the second stage debate before the summer recess.  That will allow the Department to consider amendments over the summer months and to introduce those to the Committee Stage of the Bill in the Autumn.  The Department were anxious to emphasise that they continue to be open to suggestions or proposals of amendment to the bill.  
 
If you would like to discuss any aspect of the bill, how it may be applied or how it might be improved, please contact either Paul Keane or Peter Kearney.


Keywords: Banking and Security, Commercial Law, Property, Publication, Insolvency, Peter Kearney

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