Personal Insolvency

Personal Insolvency Advice

Dillon Solicitors has developed significant experience in recent years in advising clients in relation to;

  1. Negotiations with Banks in relation to the restructuring of loans.
  2. Defending proceeding for repossession.
  3. Advising clients in relation to assets that have been acquired by NAMA.
  4. Advising clients on new Personal Insolvency Bill.

New Personal Insolvency Act

The Personal Insolvency Bill was finally enacted during the latter stages of December 2012. In its final stages prior to enactment a number of matters which had previously been flagged as likely to cause problems were addressed in amendments which came before the Seanad namely;

  1. Pensions.
  2. Excluded Debts.
  3. Reasonable Living Expenses.

  1. The position with regard to pensions has been clarified both in relation to Debt Settlement Arrangements and Personal Insolvency Arrangements in circumstances where a debtor has an interest in or entitlement under a relevant pension scheme. Where this arises that interest or entitlement must be disclosed in the prescribed financial statement. However the pension asset will not be treated as an asset of the debtor unless the debtor is entitled to drawdown or derive income from the pension either before or during or in the six month period following the DSA or PIA. If such income is received then such income will be considered for the arrangement. Furthermore there will be a claw back period of 3 years to prevent excessive pension contributions.
  2. It had been assumed that matters such as taxes, rates and Local Government Service Charges were incapable of being written down. However legislation has now divided excluded debts into excluded and excludable debts. Debts such as maintenance payments, payments in respect of personal injury claims or criminal acts cannot be written down. However debts such as taxes, rates and Local Government Service Charges can be written down and are now classified as excludable debts and potentially can be written down if the debtor in question consents or where such debts have been included in the scheme for consideration. This is an important development and is to be greatly welcomed.
  3. There has been much discussion and conjecture as to what expenses will be considered reasonable in relation to the various insolvency arrangements. The Act now imposes a requirement on the Insolvency Service of Ireland to issue guidelines as to what would constitute a reasonable standard of living and living expenses. These will have to be revised on an annual basis. While the setting up of the Insolvency Service of Ireland will no doubt take some time the enactment of this long awaited piece of legislation is timely and greatly welcomed.

This long awaited piece of legislation will provide insolvent debtors with a number of matters to assist them in managing their indebtedness. In turn the legislation will also assist creditors to recover some of the money from debtors in an ordinary way. The new Act will have the following main features;

The setting up of a new insolvency service known as the Insolvency Service of Ireland (ISI).

The Act will provide three insolvency processes namely;

  1. Debt Relief Notices.
  2. Debt Settlement Arrangements.
  3. Personal Insolvency Arrangements.

Debt Relief Notices will be dealt with directly by the Insolvency Service and will be confined only to debtors with debts that do not exceed €20,000.00 and who have assets of €400.00 or less.

The Debt Settlement Arrangements (DSA) will provide a system for repayment of a debt of up to €3,000,000.00 where a debt is unsecured. The DSA will last for 5 years with a possible extension of up to 6 years. The Act provides for the accreditation of Personal Insolvency Practitioners (PIP) who will assist insolvent debtors in putting forward realistic and workable offers to creditors. The purpose of such arrangements is to enable debtors to be resolved to a reasonable level of solvency and to give creditors an opportunity to recover their debts without the need for debt enforcement or bankruptcy.

The PIP will put a proposal to the ISI and if the ISI is satisfied that the solution offered is workable will offer a certificate of supporting documentation to the appropriate Court (Circuit Court if the figure involved is less than €2,500.00 and the High Court if it is in excess of this). The Court if it is satisfied that the solution is realistic will issue a protective certificate which will apply a stay on any action by any of creditors for 70 days.

In this period the PIP has to put the solution to the creditors with a view to getting agreement.

If the DSA proposal is accepted by 65% in value of the creditors then it will be binding on all of the creditors. If agreement is reached then the ISI is informed and they will then transmit the arrangement to the appropriate Court.

The area which is likely to be most greatly availed of is the Personal Insolvency Arrangement (PIA). These will relate to debts which are both secured and unsecured over a 6 year period with a possible extension to 7 years. There must be no likelihood that the debtor will be solvent within the following 5 year period. The debts must not exceed €3,000,000.00. The debtor must complete a prescribed financial statement and the PIP must certify this.

The application and the negotiation process is similar to a DSA. However a PIA can only be achieved where it is approved by creditors who represent 65% in value of the total of the voting creditors both secured and unsecured. Furthermore at least more than 50% in value of voting secured creditors and 50% in value of voting unsecured creditors must approve the PIA. There is a fear that this will give Banks a veto on all proposals. However Banks will be mindful of the need to be realistic in relation to any reasonable proposals as well as in the event of a proposal being rejected the only option for debtor in such circumstances may be bankruptcy which will very often leave the Bank in a worse situation then if they had accepted a reasonable proposal advanced through the PIA.

Dillon Solicitors have been advising clients in financial difficulty over the last number of years. We are happy to deal with any queries which any client or other professional advisor may have in this regard.

If you require advice in relation to any of the services listed above or if you wish to receive copies of our client newsletters and / or our business ezines please contact us on 01-2960666 or at info@dillon.ie.