BANKRUPTCY / PERSONAL INSOLVENCY

In late December 2012, the Personal Insolvency Bill 2012 finally completed its passage through the Dáil and the Seanad and became law.

The act demonstrates a very substantial move forward in the thought process behind dealing with personal insolvency in Ireland and in most ways acts as a favourable alternative to similar UK legislation and therefore a deterrent to possible forum shopping by people in financial difficulty.

While detailed, the legislation can be boiled down to relatively simple processes which should enable those in difficulty and their creditors to understand and allow for debt arrangements to be prepared and processed quickly and cost effectively.

Standing alongside the amended bankruptcy legislation which saw the period of bankruptcy substantially reduced to three years, there are 3 new forms of personal insolvency that can be invoked:

1) Debt Relief Notice (DRN)
• €60 or less net income per week
• €20,000 or less debt
• Exit at earlier of payment of 50% of debts or three years after entering process
• Debtor entitled to a reasonable standard of living (not specifically defined as of yet)
• Pensions protected to a point
• Only one such relief notice can be obtained in lifetime

2) Debt Settlement Arrangement (DSA)
• Arrangement formulated by a Licenced Personal Insolvency Practitioner (PIP)
• 70 day protection period to formulate arrangement (additional 40 days may be available)
• Max 5 year period but option to increase to 6 (no minimum period)
• Yearly status updates needed from PIP
• Creditors meet and vote to approve scheme (65% approval needed)
• No secured debt included
• Pensions protected to a point
• Certain liabilities are excluded from the process
• Certain other liabilities are excluded from the process unless the creditor agrees to inclusion

3) Personal Insolvency Arrangement (PIA)
• Protection period and PIP appointment as per DSA above
• PIP to prepare scheme with a view to keeping debtor in their family home
• Max 6 year period but option to increase to 7 (no minimum period)
• Yearly status updates needed from PIP
• Creditors meet and vote to approve scheme (65% overall approval needed subject to 50% secured and 50% unsecured approving)
• Secured debt included but limited to €3m unless written consent obtained from all secured creditors.
• Pensions protected to a point
• Certain liabilities are excluded from the process
• Certain other liabilities are excluded from the process unless the creditor agrees to inclusion

In the current economic environment, personal insolvency has become a lot more prevalent due to the substantial decline in value of nearly every asset class including property, shares and other investments.

How kavanaghfennell can help?

If you are worried about your own financial position or you are facing personal insolvency, please contact Mícheál Leydon on 01-2060800, or mleydon@kavanaghfennell.ie for a free initial consultation.

All queries will be dealt with the utmost confidentiality.