Government Publishes Draft Of Personal Insolvency Bill

Originally published on ILO, February 17 2012

The Irish government has published in draft form its Personal Insolvency Bill, to which it gave a commitment under the EU/International Monetary Fund Programme of Financial Support for Ireland.

The bill is to modernise the bankruptcy of individuals and to provide for non-judicial debt settlement systems.

Under the existing law, a bankrupt individual is discharged after 12 years, with liberty to apply after five years if the assets have been realised and preferential payments are covered.

The bill proposes to reduce the date for automatic discharge to three years, with power of the court to extend the three years to eight years if there has been wrongful conduct on the bankrupt's part.

The bill also affords the court discretion to make an order requiring the discharged bankrupt to make payments from his or her income for the benefit of creditors for a period lasting up to five years from the date of the discharge. It is stated that the court should have regard to the reasonable living expenses of the bankrupt and his or her family, and to guidelines on reasonable expenditure and essential income for debtors to be published by the proposed Insolvency Service.

A concern has been expressed by some that if the draft bill is not changed in that regard, persons might still seek to move their centre of main interests (COMI) to Northern Ireland to avail of the bankruptcy regime in the United Kingdom, with possibility of income payments for three years and discharge after one year. This is allowing that any change of COMI – where the debtor conducts the administration of his or her interests on a regular basis – must involve a real change that is both objective and reasonably ascertainable by third parties in some (although not all) cases involving notice to creditors.1

In addition, the bill proposes to extend from one to three years the period prior to an individual's bankruptcy, while he or she was unable to pay all of his or her debts, during which preference of creditors is declared void.

The bill also proposes three new non-judicial debt settlement systems for individuals:

a debt relief certificate applied for through an approved intermediary to allow persons with very limited means to fully write off qualifying unsecured debt of up to €20,000, generally after a one-year moratorium period. It is proposed that this process cannot be utilised again for six years and cannot be availed of more than...