The Minister for Justice and Equality and Defence, Alan Shatter TD is pleased to announce today the publication of the Personal Insolvency Bill 2012. The Bill was approved by the Government at its meeting on 26 June, 2012.
The development of modern insolvency law is in line with the commitments in the Programme for Government and the EU/IMF Programme of Financial Support for Ireland. This is a very significant Bill providing for a comprehensive reform of insolvency law. It provides new and more flexible options to address the circumstances of insolvent debtors.
A number of recent reports have recommended significant reforms to Ireland’s personal insolvency framework. For example, the Inter-Departmental Working Group on Mortgage Arrears (Keane) Report of October, 2011 recommended that “the early introduction of new judicial and non-judicial bankruptcy options is vital” and stated that “without effective bankruptcy legislation the mortgage arrears problem will not be resolved”. In addition, the Law Reform Commission’s December 2010 Report also made very significant recommendations. Its report and earlier work was of considerable assistance in the formulation of this Bill.
The draft general Scheme of the Personal Insolvency Bill was published for consultation by the Government on 24 January, 2012. A number of important submissions, in particular the Report of the Joint Committee on Justice, Defence and Equality, were received in response and were taken into account in the finalisation of this Bill. While the primary architecture of the draft general Scheme remains the same, considerable development of the individual provisions in terms of legal and technical detail has taken place in order to provide for a more coherent approach in the Bill.
The Minister said that the reform of personal insolvency law contained in the Bill will involve the introduction of the following new non-judicial debt resolution processes, subject to relevant conditions in each case:
· a Debt Relief Notice to allow for the write-off of qualifying debt up to €20,000, subject to a three year supervision period;
· a Debt Settlement Arrangement for the agreed settlement of unsecured debt over 5 years;
· a Personal Insolvency Arrangement for the agreed settlement of secured debt up to €3 million (though this cap can be increased with the consent of all secured creditors) and unsecured debt over 6 years.
The new Insolvency Service, to be established under the Bill, has a role in either certifying or determining an application for a Debt Relief Notice or certifying applications for a Debt Settlement Arrangement or a Personal Insolvency Arrangement and, thereafter, referring the relevant documentation to the Circuit Court.
In order to protect the constitutional rights of all concerned provision has been made for Circuit Court oversight of these three new procedures.
The significant reform of the Bankruptcy Act 1988, begun by the Minister in the Civil Law (Miscellaneous Provisions) Act 2011 is continued. The critical new element is the introduction of automatic discharge from bankruptcy, subject to certain conditions, after 3 years as opposed to 12 years at present. This development moves Ireland to the European norm for such discharge.
The Minister is conscious that further development of the text of the Bill will be necessary in regard to a number of issues. This work will continue and it is his intention to bring forward further relevant proposals and amendments during the progress of the Bill through the Oireachtas in the Autumn.
Minister Shatter said that “this Bill is designed to provide a modern insolvency process in Ireland which addresses the obligations of debtors and the rights of creditors in a proportionate and balanced way having regard to the financial reality of an individual’s true circumstances.”
Minister Shatter further said “I am convinced that new personal insolvency laws including the reform of our bankruptcy law will, in addition to providing new legal remedies, also provide a significant incentive for financial institutions to develop and implement realistic agreements to resolve debt issues with their customers. The provisions relating to a Personal Insolvency Arrangement are specifically designed to facilitate a debtors continued ownership and occupation of his principal private residence unless the debtor does not wish to do so or the costs of the debtors continuing to reside in it are disproportionately large.”
The Minister noted that failure to agree a suitable non-judicial debt settlement between debtors and creditors will leave open the option of debt enforcement or judicial bankruptcy.
The Minister hopes that the provisions of this Bill will receive careful consideration by all potentially affected by it. He is keen to stress, however, that individual circumstances vary and that the solutions found within the context of the DSA and PIA processes will also vary. The Minister is anxious to emphasise that the Bill makes it clear that those persons experiencing difficulties in regard to mortgage arrears should engage with their lenders so as to seek a satisfactory solution and also emphasised the importance of lenders constructively engaging with customers in genuine financial difficulty. The protections afforded under the Central Bank Code of Conduct on Mortgage Arrears will continue to be available to co-operating borrowers.
The Minister expressed the hope that the provisions contained in the Bill act as the catalyst to honest, open and constructive engagement between both unsecured and secured creditors (including financial institutions) and those in genuine substantial financial difficulty. He stated that “the Bill provides concrete options for those genuinely unable to discharge their financial obligations as opposed to those who can but won’t do so.” Moreover, he noted that if creditors fail to constructively engage in the DSA or PIA process or if agreement does not prove possible, the option of initiating an application for a court adjudication of bankruptcy is available both to creditors and to an insolvent debtor.
Minister Shatter also reiterated that the Bill does not provide for the automatic writing-off of negative equity, where such may exist. Where a person is in a position to service their mortgage or other debt obligations, they must continue to do so. This Bill does not relieve solvent debtors of their responsibility to meet their contractual obligations.
The Insolvency Service of Ireland will be established to operate the new insolvency processes and to provide a focal point for development of insolvency policy in the future. The Minister is advancing the organisational planning for the new Service and the Director Designate will likely be appointed during the summer
The Personal Insolvency Bill 2012 is available on the Oireachtas website; www.oireachtas.ie
Supplementary Information on Mortgage Arrears is available on the Department of Justice and Equality website by accessing the following link; www.justice.ie/en/JELR/Pages/PB12000197