Changes To Ireland's Personal Insolvency Regime

Author:Ms Julie Murphy-O'Connor, Brendan Colgan, Tony O'Grady and Niamh Counihan

The Personal Insolvency (Amendment) Act 2015 (the "Act") was signed into law on 28 July 2015.  It introduces a number of changes to the Personal Insolvency Act 2012 (the "2012 Act").  These changes include:

the establishment of a Circuit Court review mechanism in instances where creditors reject a borrower's proposal for a Personal Insolvency Arrangement ("PIA") an increase in the amount of debt which may be covered by a Debt Relief Notice from €20,000 to €35,000 an increase in the functions and powers of the Insolvency Service of Ireland ("ISI") Circuit Court review

Under the 2012 Act, an insolvent debtor could seek to enter into a PIA with his creditors whereby debt could be written off and restructured allowing the debtor to return to solvency within a fixed period of time.  Before the PIA proposal could become legally binding, it had to be approved by a majority of creditors. In circumstances where a PIA proposal was rejected by creditors, there was no provision for a review or appeal. Accordingly, the 2012 Act was widely criticised as not doing enough to assist distressed borrowers in that, notwithstanding the provisions enabling a borrower enter into a PIA, the banks maintained an effective right of veto over a borrower's PIA.

The Act has amended this position by permitting an application to be brought before the Circuit Court when a PIA proposal is not approved. The Circuit Court can then review the PIA proposal and make an order imposing the PIA proposal if it considers that a fair and equitable solution is offered to both the debtor and creditors.  It will be interesting to see whether the amount of PIAs will increase following this enactment or whether, in practice, the banks will continue to exercise a veto over the implementation of many PIAs by being able to demonstrate that the solutions offered by distressed borrowers are not just and equitable. 

Applications to appeal the rejection of a PIA proposal must be taken to the Circuit Court by...

To continue reading