A
number of our solicitors attended a seminar update earlier this week on the
Personal Insolvency Act. Considering that the Act was passed into law with the
intention of relieving the huge financial constraints on many people in Ireland
at the moment, it isn’t entirely clear that it is going to have the desired
effect.
There
are a large number of requirements for a person to be eligible to enter into an
insolvency arrangement in the first place, and considerable obstacles can be
foreseen in getting a person’s creditors to agree to an arrangement. For
example, if your main creditor is a bank and you are in negative equity situation,
from the bank’s point of view a personal insolvency arrangement is most
unappealing. At a time when the newspaper headlines are telling us that banks
are going to start repossession proceedings with a vengeance as soon as new
laws are passed it is unclear if people in that situation will get any relief
from the pressures they are under.
As
the Act isn’t yet fully operational it remains to be seen how it will work in
practical terms, and whether it will actually offer relief to those who need
it. The new Insolvency Service of Ireland website is expected to go live next
week and their offices are fully staffed and ready to go. Here is some of the
information gleaned from the seminar:
- If you want to enter into a scheme of arrangement under the Act and part or all of your debt is by way of a mortgage, you will have to prove that you have engaged in the Mortgage Arrears Resolution Process (MARP) with your bank for at least 6 months.
- If you want to enter into a scheme of arrangement you will have to engage a Personal Insolvency Practitioner (PIP). No PIP’s have yet been appointed by the Insolvency Service of Ireland, which have to approve an individual as eligible to act as a PIP. There isn’t yet any application process to become approved as a PIP. This information may be included on the website when it is launched.
- The Insolvency Service of Ireland expects there to be 3,000 – 4,000 applications for Debt Relief Notices (for unsecured debt under €20,000.00), and 15,000 applications for Debt Settlement Arrangements and Personal Insolvency Arrangements, this year alone.
- The Act allows for the appointment of “Specialist” judges of the Circuit Court to deal with all applications (except for those cases where the debt is over €2.5 million, which must be made in the High Court). At present, these specialist judge appointments can only be applied for by those who are County Registrars whose role is described here. County Registrar’s are already working full time in their respective Circuit Court Offices and are now expected to hear almost 20,000 new applications each year. It is not clear how this will work.
- Bankruptcy is expected to become a preferred option to personal insolvency in some cases. The new law, once it is enacted, will allow for a bankruptcy to end after 3 years, as opposed to 12 years which is currently the case. There is provision, however, for a Bankruptcy Payment Order to be put in place for a further 5 years whereby the bankrupt will be required to make additional payments from his or her income or assets for the benefit of his or her creditors. The court must have regard to the bankrupt’s reasonable living expenses in making a Bankruptcy Payment Order.
Hopefully
as more information becomes available about the Insolvency Service of Ireland
over the next few weeks the situation will become clearer, and hopefully the
Act will have the intended effect of easing the enormous pressure too many
people are facing these days.
(See our earlier post on Personal Insolvency)
Maria O’ Donovan, Solicitor
Wolfe & Co.
