The Personal Insolvency Bill 2012

Author:Mr Rod Ensor, Niamh Counihan, Julie Murphy-O'Connor and Tony O'Grady
Profession:Matheson Ormsby Prentice

The long awaited Personal Insolvency Bill (the "Bill") was published on Friday, 29 June 2012 and provides for significant changes to the personal insolvency regime in Ireland. However, it does not differ greatly from the general framework for personal insolvency reform published earlier this year. Some key points are as follows:

The period for automatic discharge from bankruptcy is to be reduced from twelve to three years Bankruptcy will only be available where a debtor's liabilities are over €20,000 An independent body known as the Insolvency Service is to be established, which will oversee three new debt settlement mechanisms contained in the Bill: (1) Debt Relief Notices, (2) Debt Settlement Arrangements and (3) Personal Insolvency Arrangements The reduction in the bankruptcy period from 12 years to three years (subject to court discretion to order the making of payments to creditors from a discharged bankrupt's income for a period lasting up to five years from the date of the discharge) is a significant change.

However, given the possibility of orders in respect of a bankrupt's income being made for a further five-year period, it is not clear whether this provision will be sufficient to affect the trend whereby insolvent individuals are moving their centres of main interests (COMI) to the United Kingdom to avail of the possibility of discharge from bankruptcy after one year.

The proposed debt settlement mechanisms, which are designed to offer an alternative to bankruptcy for individuals in certain prescribed circumstances, are summarised below.

Debt Relief Notice (DRN)

An insolvent individual with unsecured debts of €20,000 or less and very limited means (eligibility criteria include having a net disposable income of €60 or less a month, having assets of €400 or less, and having no likelihood of becoming solvent within a period of 5 years) may apply, through an approved intermediary, to the Insolvency Service for a Debt Relief Notice ("DRN"). Once the Insolvency Service is satisfied that the application is in order, it will issue a certificate to that effect, and furnish the certificate and the application with supporting documentation to the Circuit Court, which, if satisfied that the appropriate criteria have been satisfied, will issue a DRN. A DRN will provide a three-year "protection period" during which creditors cannot pursue the debtor in respect of debts specified in the DRN. If the debtor is unable to pay the debt at...

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