Personal Insolvency Bill Update

Author:Mr Paul Dobbyn, Nollaig Murphy, Dudley Solan and Robin McDonnell
Profession:Maples and Calder
 
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Heads of Bill

On 25 January 2012 the Irish Government published the heads of a new Personal Insolvency Bill for Ireland (the "Heads"). The Heads incorporated many of the findings and suggested strategies of earlier reports on the topic (namely the Law Reform Commission Report on Personal Debt Management and Debt Enforcement 2010 and the Inter-Departmental Mortgage Arrears Working Group Report 2011).

We previously published an update on this entitled New Personal Insolvency Legislation intended for Ireland.

Interested parties were invited to submit commentary on and suggest amendments to the Heads to help shape the final Bill.

Personal Insolvency Bill

On 29 June 2012 the Irish Government published the Personal Insolvency Bill 2012 (the "Bill"). Further amendments during the progress of the Bill through the Oireachtas are expected and it is anticipated that the legislation will be in place before the end of 2012. The Bill provides for the establishment of an independent body called the Insolvency Service of Ireland (the "Insolvency Service"), the principal functions of which will be the management of the three new personal insolvency systems and maintaining the new personal insolvency registers.

The Bill introduces the following three new non-judicial debt settlement processes:

Personal Insolvency Arrangements ("PIAs"); Debt Settlement Arrangements("DSAs"); and Debt Relief Notices ("DRNs") (previously called Debt Relief Certificates in the Heads). Further details on each are set out below.

With regard to the bankruptcy laws, the Bill proposes the automatic discharge of a bankrupt from bankruptcy, subject to certain conditions, after three years.

Material Changes in the Bill from the Heads

There are a number of material changes from the Heads to note:

The Circuit Court (and for debts in excess of €2.5 million, the High Court) now has jurisdiction in relation to all three processes and must sanction their approval in each case. Under the Heads only the PIA was subject to court oversight. Certain debts are not eligible for inclusion in the three processes including taxes, duties, levies and other charges owed to the State. This, in effect, excludes the State and why this favourable carve out for the State was inserted is uncertain. In addition, preferential creditors are still given priority and are required to be paid in full. The PIA is available in respect of secured debt of up to €3 million and all unsecured debt. Although the €3 million cap on secured debt can be waived if the written consent of all secured creditors is obtained, there is no limit for unsecured debt. The Heads had capped the limit for all debt at €3 million. Under the Heads, a majority of creditors of not less than 65% in value of the total secured and unsecured debt was required to vote in favour of a PIA together with a majority of 75% of the secured creditors and 55% of the unsecured creditors. The Bill waters this down by providing that the PIA must be approved by a majority of creditors representing at least 65% in value of the total secured and unsecured debt, but only creditors representing more than 50% of the value of the secured debts; and creditors representing more than 50% of the value of the unsecured debt must also be in favour. "Debt" is only defined in the Bill with reference to the chapter on DRNs and has not been defined for DSAs or PIAs. The definition includes current and prospective debts that will be payable at a specified time in the future but does not include contingent liabilities. This is a possible oversight and...

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