Over 15,000 people will avail of new debt resolution procedures within the first year
8 November, 2012: Expected to be passed into law next month, the Personal Insolvency Bill, currently at the report stage in Dáil Eireann, is the most important and anticipated piece of legislation to be delivered by this government. In advance of the Bill’s enactment over 150 representatives from Ireland’s Banking & Finance sector attended a briefing hosted by Michael Quinn and Fergus Doorly, Partners, Insolvency & Corporate Recovery, William Fry.
The briefing emphasised the implications of the three mechanisms provided for by the bill; Debt Relief Notice, Debt Settlement Arrangements & Personal Insolvency Arrangements. Attendees also heard from guest speaker Toby McMurray, Partner at Tughan’s in Belfast, who spoke about the lessons learned from similar reforms to bankruptcy law introduced in the UK a number of years ago.
“The Personal Insolvency Bill provides for a number of debt resolution processes and will distinguish between debtors who are genuinely unable to pay their debts and those who are unwilling. The first provision; Debt Relief Notice, allows for the full write-off of a qualifying unsecured debt up to €20,000, however the debtor must have a net disposable income of less than €60 per month and net assets or savings worth €400 or less. The second provision, Debt Settlement Arrangements (DSA), allows for the settlement of unsecured debt without any monetary limit. In this case, the creditor pays the debtor what they can after providing for what the bill calls ‘a reasonable standard of living’. Under the legislation, this arrangement must be facilitated by a new type of financial advisor known as a Personal Insolvency Practitioner or PIP,” said Michael Quinn.
Fergus Doorly discussed the third mechanism provided under the bill, “Of the three, it is the Personal Insolvency Arrangements (PIA) that will affect secured lenders and secured borrowers in arrears. The aim of the PIA is to provide a reasonable alternative to bankruptcy while, where possible, leaving the borrower with their house and an affordable mortgage payment. In order to qualify for a PIA, the secured liabilities of the creditor must not exceed €3m. The cap of €3m is something that may limit the effectiveness of the legislation as it reduces the number of people who can avail of it”.
Fergus Doorly advised attendees of the implications of reducing the mandatory Bankruptcy period. “Once enacted, the mandatory Bankruptcy period in will be lessened from 12 to three years in Ireland making it a viable option for those who cannot avail of any of the three debt resolution processes as set out in the bill.”
Toby McMurray went on to compare the bankruptcy period in Ireland at 3 years to that of only 1 year in the UK adding ”that debtors will still explore the possibility of availing of the bankruptcy laws in the UK”.
Fergus Doorly advised attendees that “the Personal Insolvency Bill will allow people to resolve debt issues in a way that balances the rights of creditors and debtors. It is expected that over 15,000 people will avail of the mechanisms set out under the new legislation within its first year.”
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