Personal Insolvency Update

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.

www.wolfe.ie

maria.odonovan@wolfe.ie

Surrogacy Update- 5th March, 2013

Decision in the Case of M.R & Anor -v- An tArd Chlaraitheoir & Ors

A landmark case has been won by the genetic mother of twins born through a Surrogate. Mr Justice Henry Abbott ruled that the genetic mother is entitled to be listed as a mother on the twins’ birth certificates. The decision will be cause for celebration for many parents across the country where their genetic child was born via a surrogate.

However, for those not fortunate enough to have a genetic link to their child their rights still remain unclear. The case before the High Court was as straightforward a surrogacy arrangement as one could hope for. The commissioning parents were the genetic parents of the child. The surrogate, sister of the genetic mother, did not object or contest the assertion of motherhood by the genetic mother and actively supported the genetic mothers’ argument. Hence, the decision may be limited to a very narrow remit of surrogacy situations.

Even so, the decision has caused reverberations in the larger field of assisted reproduction. If the reasoning of the Court is taken to its penultimate, where genetics is to be the basis of paternity and maternity, Egg and Sperm Donors may find themselves unwittingly deemed a parent - with all the rights and responsibilities that attach - despite that never being the intention of the donor or the commissioning couple.

Whilst the decision is broadly welcomed in the particular case concerned, it is hoped that it will now prompt the legislature to take action and bring forth a framework which provides clarity to the array of modern day family anomalies that exist. 

Niamh O' Connor

Solicitor

Wolfe & Co. 

www.wolfe.ie  

You're suing who???

The daily life and times of a litigation lawyer these days in Ireland is not always full of the cut-and-thrust type litigation I thought I might be doing when I started studying law – it’s not always “Legally Blonde”, or “The Good Wife” (I wish!). So when taking a break from the day to day court cases that cross my desk I started thinking about the “fun” cases we learned about in law school; the kind of cases that stood out in my memory at least and helped me to remember some particular points of law that needed to learned.

1 – You must be sure you’re suing in the right jurisdiction. As a general rule, if you want to sue a person you have to do it in country or region where they live. So in the case of Gerald Mayo –v- Satan and His Staff the claim was rejected by the Court because the Court could not be sure that the jurisdiction was correct. Also, the Court queried how the papers were going to be served on Satan in the proper manner. Incidentally, the outcome was the same in the case of Chambers –v- God.

2 – In contract law, for there to be a valid contract an offer must be made which is capable of being accepted. In Leonard v Pepsico the Plaintiff sued Pepsi following a particular ad campaign. Pepsi ran a promotional offer where if you collected various numbers of points you could redeem them for different items. The end of the ad saw a Harrier jump jet flying overhead, with the message on-screen “Harrier Fighter 7,000,000 Pepsi Points”. The terms of the promotion also stated that you could redeem gifts for either the points, or pay $0.10 per point. Mr. Leonard sent Pepsi 15 Pepsi points and a cheque for €700,008.50 (to include a $10.00 shipping fee). The Court, in New York in 1999, held that the ad did not constitute an offer; that no reasonable person would have considered that portion of the ad to have been an offer; and that it was clearly a joke.

3 – If you’re writing a handbook for an “automatic” motor home / camper van make sure you state clearly that it must be driven at all times by a human being. Winnebago were sued in the US after a man bought a Winnebago motor home, set off on a trip on the freeway, set the cruise control to 70 mph and went in the back to make himself some coffee. The man claimed that the handbook never said that he shouldn’t have done this. Somewhat unbelievably he won his case (and the Winnebago company changed their handbook).

More law school musings may follow – you’ve been warned!

Maria O’ Donovan, Associate Solicitor

Wolfe & Co., Market Street, Skibbereen, Co. Cork

www.wolfe.ie

Maria.odonovan@wolfe.ie

Don't be the weakest link ... "bank"!

Why it’s better to set Maintenance Payments in stone.

I had a client come in to me the other week (lets call her Mary), with a query that I have heard many times before….”my childrens father has stopped paying maintenance for our daughters, can I go to Court to recover the money?”

The answer is “yes”, but in her particular circumstances “no”. You see, Mary had no Maintenance Order from the Court, she had no formal Maintenance Agreement with her ex-partner and, it transpired, would have difficulty in proving that they had any Maintenance agreement that he was now defaulting on.

This happens far too often. I see in this weeks Examiner that just one quarter of people found to owe child maintenance payments last year, began making payments after being contacted by the Department of Social Protection.

Mary had separated from her ex about two years previously. They had never been married. They agreed between them that he would pay maintenance of €100 per week for the two girls directly to Mary and she found it easier to get it in cash from him and spend it directly on expenses for the girls growing needs. All motored along gaily for 6 months, while their relationship remained amicable however, matters took a turn and for reasons best known to himself, he stopped paying.

Mary, thankfully at the time, was in a good job and managing well financially without State assistance and soon realised that she did not need the funds for immediate expenditure on the girls.  She decided not to pursue the money and instead to allow it to “clock up”, with the intention that she let it build into a nice nest egg for the girls and pursue it when she needed it.

But, as is the sorry story for many these days, about 2 months ago, Mary’s employer’s business folded and she lost her job.  She was obliged to apply for One Parent Family Payment.  She learned that she was obliged to pursue the children’s father for Maintenance and felt safe in the knowledge that she could both apply for a Maintenance Order and pursue the arrears.  It wasn’t going to be that easy.  I explained that, yes, we can bring a Summons for a Maintenance Order but that any Maintenance Order would only be able to provide for payments going forward and not provide for back payments.  If, however, she had entered into a Maintenance Agreement two years previously, or obtained a Maintenance Order at the time, we could sue for the breach of the Agreement or Order and recover some or all of the arrears, or, even better, use the existence of the Agreement or Order to talk sense to her ex and get things back on track without having to go to Court.

Mary had failed to “bank”, when things were getting dicey and was now left with having to satisfy a Judge that while there was very little proof of one on paper, that there was a maintenance agreement that he has now breached.

We have tried to resolve it with his Solicitor who has taken the position that there was never such an agreement.  All is not lost and we are going to give it a shot in Court…at the very least she will likely achieve a Maintenance Order which will secure the payments for the foreseeable future, but she may have to kiss the nest egg goodbye…..

….Oh it would have been so much easier, had she “banked”.

Colette McCarthy

Wolfe & Co.

www.wolfe.ie

Colette.mccarthy@wolfe.ie

087 0508541

Personal Insolvency Bill

It is expected that in March or April of this year the Personal Insolvency Bill will become law. The stated aim of the law is to alleviate the enormous financial burden being faced by many people in Ireland’s poor economic climate; to help them to get back on their feet and contribute to economic activity again; and to enable creditors to recover money due to them by individuals to the extent that their means allow. The Insolvency Service of Ireland will be established under the Act and will be responsible for the running of the various schemes.

The Bill creates three separate schemes which those eligible can enter into according to their requirements:

a.                  Debt Relief Notice (DRN) – this is available for people who have unsecured (i.e. not charged to property or other assets) debts of up to €20,000.00. Such debts might include, for example, credit card debt, unsecured bank loans or overdrafts, utility bills etc. The process of applying for a DRN is extremely detailed, and involves the preparation of a detailed financial statement by an “approved intermediary” on behalf of the debtor. An application is made to the Insolvency Service initially who then apply to the Court for the issue of the DRN, which if granted will last for 3 years.

b.                  Debt Settlement Arrangement (DSA) – this scheme applies to people whose debts are unsecured and valued at over €20,000.00, with no upwards limit. Here, the debtor will apply through a “Personal Insolvency Practitioner” to the Insolvency Service and thereafter the Court for a protective Certificate. This Certificate will give a period of 70 days for a meeting to be held with the creditors. At that meeting, the proposals for repayment of the debts will be put to the creditors. To put the scheme in place, the approval of 65% in value of the creditors is required. Once in place a DSA can last for up to 5 years, and once it expires the creditors are deemed to be repaid in full. The debtor is subject to certain restrictions while the DSA is in place.

c.                  Personal Insolvency Arrangements (PIA) – this applies to those whose debts are either secured or unsecured or both, up to a value of €3 million. The process is similar to that of the DSA, with a Protective Certificate being issued by the Court, a creditors meeting being held and voting requirements needing to be met. This scheme can last for up to 6 years.

Effect of schemes on a debtor:

Clearly the benefit to a debtor in entering into one of the schemes is that once the scheme has come to an end, the debts are deemed to have been fully discharged. While one of these schemes is in place, a debtor is subject to supervision and to certain restrictions in his / her financial activities for the duration of the scheme. For example, increases in income or receipt of cash gifts must be declared to the Insolvency Service and in some cases 50% of the value of both must be paid over to the Insolvency Service. Credit over a specified amount can only be obtained subject to conditions. A debtor is obliged to report any material changes in circumstances. Generally, a debtor must co-operate fully in the process and comply with any reasonable request made by the Personal Insolvency Practitioner for information, documentation etc. If the debtor defaults on the approved arrangement then the scheme will be terminated and the debtor will again become liable for repayment of the full amount of the debts.

Effect of schemes on creditors:

In all cases, once the initial Court application has been granted, the debtor is protected against his creditors pursuing him / her for the recovery of the debts. A creditor can neither issue Court proceedings against the debtor nor continue with existing Court proceedings. A creditor can object to the scheme being put in place, either by voting against an arrangement at the creditors meeting, or by making an objection to the Court after the initial application. Furthermore, a creditor can apply to Court at any stage while a scheme is in place for termination of the scheme on a certain number of grounds, for example if the debtor is in arrears of agreed payments, or where the creditor believes that the debtor was ineligible in the first place to enter into the scheme.

It obviously remains to be seen how many people will avail of Personal Insolvency protection: it is not a straightforward process by any means and there are a number of strict eligibility requirements for each type of scheme. The question also remains as to who the Personal Insolvency Practitioner will be. The hard-pressed debtor will need robust and experienced assistance and protection. How will the debtor meet the cost of this? It will also be interesting to see how many creditors will readily consent to the arrangements – will it be a case of some payment being better than no payment? Certainly some of the banks have commented publicly that they do not intend to engage in any form of debt forgiveness. However, some are predicting that over 15,000 applications will be made in the first year alone and it may be hard to ignore those kinds of numbers in the longer term.

Maria O’ Donovan, Solicitor

Wolfe & Co., Skibbereen

www.wolfe.ie

maria.odonovan@wolfe.ie

Legal Aid in Ireland

There is an informative article in today’s Irish Times regarding the Legal Aid system in Ireland and the huge increase in demand which it has seen in the last number of years. This is due in no small part to the increased number of people who require legal services and who qualify for Legal Aid due to reduced income, unemployment etc. When advising clients who are hard-pressed financially I must always advise them of their entitlement to seek Legal Aid. However, I must also advise them that in the Cork area they will be waiting for approximately 8-10 months for an appointment to meet with a Legal Aid solicitor.

There are very few cases where such a wait is acceptable. While in certain emergency situations a client will be assigned a solicitor immediately (domestic violence applications or childcare proceedings for example), usually the first meeting with the solicitor will be at the Court. This places additional worry and stress on a client who is already in the midst of a very stressful situation.

Without a doubt the Legal Aid Board, as with all other State agencies, are under huge financial and budgetary constraints, and in fairness they do give the very best service that they can. They have now, at a time when they are under such pressure, taken on the running of the family mediation service and are about to take on the running of the criminal legal aid scheme as well. This can only serve to place further pressures on an already over-burdened system.

There is a scheme called the Private Practitioners Scheme which the Legal Aid Board run. This allows, in certain circumstances, private solicitors like me to take on a Legal Aid Board client. While the scheme is not without its limitations, it does allow a client who qualifies for Legal Aid to access a solicitor in a timely manner and to have their court case dealt with in much the same manner as a private client. Again, due to budgetary constraints, access to this scheme has been reduced in recent times. There are also certain types of cases to which the scheme does not apply, e.g. childcare cases, and separation and divorce proceedings which take place in the Circuit Court as opposed to the District Court. It seems to me that an extension of the scheme, even if for a limited time, would clear the enormous waiting lists which the Legal Aid Board has at the moment and allow for the level of access to justice to which all citizens are entitled.

Maria O’ Donovan

Wolfe & Co.

www.wolfe.ie

maria.odonovan@wolfe.ie

New Year's Resolutions

It’s that time of year again when we make all sorts of promises to ourselves that we seldom keep, at least not for very long.

This year, as well as the usual keep fit and get healthy resolutions we have been thinking about what legal New Year’s resolutions we could make. This is a good time of year to take stock and review your situation in life, and if necessary take steps to put your house in order, so to speak. We’ve carried out a quick survey in the office and here are our top ten: 

1. Make a Will! If you are to have any say over who gets what when you die it is vitally important to make a Will. You can read more about the importance of making a Will here. If you already have a Will in place, does it need to be updated?

2. Have you considered putting an Enduring Power of Attorney in place? This is a document which can come into effect should you become incapable of managing your own affairs. Read more about this here

3. Registering rights of way: If you access your property through someone else’s property you should check to see if your access is registered or not.

4. Mortgage or debt restructuring – if you are an individual, are you aware of the Personal Insolvency Bill? Could restructuring be more or less beneficial for you? If you are a business, could debt restructuring help with cash-flow?

5. Review your insurance policies and life insurance. Are there better policies out there for you?

6. Property – if you are married or in a civil partnership you should consider transferring property into your joint names if it is held by only one of you.

7. If you are separated, consider formalising your separation, or divorce if you are eligible.

8. Unmarried fathers – consider formalising guardianship in respect of your children.

9. Unmarried couples – do you need to put a cohabitation or co-ownership agreement in place?

10. Businesses – are you considering setting up a new business or winding down an existing one? Do you know all of the legal implications?

Now there’s food for thought!

Wolfe & Co., Market Street, Skibbereen, Co. Cork

Tel: 028 21177

www.wolfe.ie

info@wolfe.ie