Heads up on Insolvency bill
“The Government is acutely aware of the financial stress that households are facing arising from difficulties in meeting their mortgage and loan commitments.
The introduction of a new Scheme of Personal Insolvency is a key step in addressing the mortgage arrears crisis. This Personal Insolvency scheme will rebalance the rights of the borrower and lender in a fairer manner.”
Micheal Noonan, Minister for Finance
When the Personal Insolvency Bill becomes law later this year it should give hope to those who find themselves overwhelmed by their debts. The Bill proposes the appointment of a State-run insolvency service to help people manage their debt.
It cuts the bankruptcy period from 12 years to 3 years and introduces three voluntary debt–settlement systems, which will offer people ways to sort out their finances outside of formal court insolvency.
- Debt Relief Certificate – Certificate of forgiveness – allows for the write-off of debts of no more than €20,000, mostly credit card debt and personal loans after a period of one year during which time the debt are frozen.
Only those with no assets and a net monthly disposable income of €60 or less can qualify.
- Debt Settlement Arrangement – For those who have debts over €20,000 excluding mortgages and covers loans with two or more creditors. A repayment plan is drawn up, in which the consumer pays what they can manage over a five year period.
At the end of the Five years, debts covered under the arrangement are discharged.
- Personal Insolvency Arrangement – this is aimed specifically at mortgage holders, covering debts, both secured and unsecured, ranging from €20,000 to €3m.
It allows for a possible write-down of some of the debt, once there is an agreement with 65% of lenders involved.
Borrowers have specific protections for their family homes with a PIA. The arrangement aims to have the consumer solvent within six years with unsecured loans discharged and secured loans restructured at a level the consumer can manage.
Under the bankruptcy and insolvency proposals, those in arrears will be allowed to reach a deal with their creditors, allowing them write down some of the debt and spread payments over a six-year period.
However, a majority of creditors, such as banks, will have to agree to the deals on a case-by-case basis.
“The proposals in the new Insolvency Bill will be fully published by the end of April and enacted at the very latest in September.”
Justice Minister Alan Shatter