# The new Personal Insolvency Act is headed for failure



## Dr.Debt

"Train spotter" that I am , I have spent many hours pouring over the new Insolvency bill. Under current circumstances, I just cant see how its going to work and the Minister will need to amend it very quickly or we risk letting the banks, force this country to its knees for another thirty years.

It appears to me that the position of each of the parties is as follows

1) Minister for Justice
has repeatedly said that we need to resolve the unsustainable debt in our economy and we need to do this to allow people to get on with their lives and restore growth to the economy as early as possible. The PIB is framed in such a way that insolvent debtors will pay as much as possible towards their debts for the 1st five or six years of the arrangement after which time, the remaining debt will be written off. Unfortunately there is a veto in the bill that will allow the banks to dictate the outcomes in most cases and the big worry is that the banks have repeatedly said that there will be no write-offs whatsoever. It seems to me that the banks will "play" with this piece of legislation. Shatter has said that he will review the legislation early if it seems that the banks are not cooperating. The battle lines are drawn.Only time will tell if Minister Shatter is also playing for time or if he is really serious about getting this piece of legislation to work as intended.

2) The Banks
are between a rock and a hard place. They are worried that they wont be able to keep the flood gates closed if they start down the road of "debt forgiveness" Their balance sheets are not strong enough for massive debt write off and they worry about separating the "cant pays" from the "wont pays" Some commentators are beginning to think that the arrears problem in the Irish banks is a lot worse than reported and the impairment provisions are under-stated. If the banks need further capitalization, its unclear where it will come from. The banks current solution appears to involve "parking" or "warehousing" unsustainable debt into the future. For example if a debtor owes 500K and can only service 200K, the reamaining 300K is "parked" until the 1st 200K is dealt with and then the intention is to work on a repayment plan for the remaining 300K.This is a dangerous game by the banks. The debtor has one ace left in his hand. His choice is to sign up for the bank "master plan" OR file for bankruptcy. The banks are gambling that individuals will shy away from the bankruptcy option. I think they're wrong

3) The Debtor
is frustrated at the lack of action by the banks. Many have lived the nightmare for a number of years already. It seems to me that very few will want to sign up for 30 years of debt repayment. It doesn't make sense.

My worry is that the government will shirk their responsibility to solve the crisis. They have drafted the Personal Insolvency bill which in itself is a powerful framework to resolve the issues however it falls down completely by placing the balance of power in the hands of the banks. The dilemma is that the banks will act in the interests of the banks (as they have always done) and not in the interests of the people or the economy.

The bottom line is clear. As a country, we will need to write off debt and we will need to recapitalize the banks again in doing so. This is a government responsibility and the big mistake now is delegating it to the banks who are lining up to make a big problem, even bigger.  

The discussion that should be taking place is a recognition that the PIB will involve writing off debt (which it does) which inevitably will result in recapitalizations of the banks. The government should be considering how to handle such a recapitalization.There is no visible discussion on this subject at all. We cant fix the economy if we don't properly address the debt crisis. The situation is farcical.

If every Tom Dick and Harriet can see no way out of their individual financial messes and all decide to go bankrupt (and the real danger here is that it could become "fashionable" / acceptable to go bankrupt) then the banks will be forced to write off ALL the debt rather than a PART of the debt which might otherwise be possible under a properly functioning insolvency act. The banks are gambling again with the tax payers money and I'm not sure everyone realises that yet.

I have communicated recently with several individuals who are waiting to have their problems solved, and owing typically 300K on failed property investments. All of them would be willing to pay back around half the amount owed, provided the bank is willing to write off the other half. None of them are prepared to spend the rest of their lives paying back a debt and having nothing to show for it at the end. They all speak about bankruptcy as the only show in town. The banks are acting tough and attempting to play the "long game". It wont work.The banks really need to tune into the Personal Insolvency Bill OR they will end up writing off a lot more bankruptcy debt than would otherwise be necessary. The banks are in survival mode. Things will have to change and change quickly.

I have no confidence that the banks will actually do what needs to be done. The banks want to avoid further recapitalizations at all costs or anything that will increase government ownership and control. Buckle up, we're in for for bumpy ride


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## Kerrigan

Excellent post.



Dr.Debt said:


> If every Tom Dick and Harriet can see no way out and decides to go bankrupt and the danger is that it could become "fashionable" then the banks will be forced to write off ALL the debt rather than a PART of a debt which might be possible under a properly working insolvency act. The banks are gambling again with the tax payers money and Im not sure everyone realises that



The vast majority of people do not realise this.  There are a lot of professional, well educated people on this forum that have not grasped this basic concept.  It is simple arithmetic. 

The domino effect has yet to begin.  The PIB will fail when the hoards file for bankruptcy.  And file for bankruptcy they will.  Can you blame them?  

My OH works closely with debtors; I can tell you people are at breaking point.


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## ladylu

You are right with all you said from what i have seen with my husband. Why not go bankrupt? 

And who can blame the bank from doing what is in the banks best interest but bankers are short sighted people who are in an insolvent bank so they are against the wall. And if they do what is necessary for the country to get back on its feet the banks effectively go broke very fast and need a bail out or they can keep everyone on a lifetime of debt on interest only payments and they may stay in business a bit longer but the country stays broke.

At the time I thought that the bank bail out was a good idea but now I believe we should have let them fail. We would have had loan books sold off very cheaply and the new owners would have looked to realize what they could from the loan book and written off the rest. Que everyone getting back on with life and having a future to *work*  for in which without the debt hanging over us we could afford to pay a bit more tax which would of brought our national budget in to order.

I am wondering if its a plan from above to hide the real problems in the banks so that we can get Europe to underwrite the future bank bail outs and then the reality comes to light. 



Mod Edit: discussion about Central Bank Survey moved here.


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## Kerrigan

The shortsighted decisions of the banks will be made this year.  I would love to see people bankrupt themselves before they become mere slaves to the glorified charities that we call banks.  

The country currently does not have a banking system anyway.  Capitalism has failed.  Wake up boys!


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## burmo

Dr.Debt said:


> 3) The Debtor
> is frustrated at the lack of action by the banks. Many have lived the nightmare for a number of years already. It seems to me that very few will want to sign up for 30 years of debt repayment. It doesnt make sense to anybody.



You have written a very detailed post, but this part is a bit strange for me... in many cases those with significant negative equity have already signed up for the 30/35/40 repayment term. Can you please elaborate on this point?


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## ladylu

Kerrigan said:


> The shortsighted decisions of the banks will be made this year.  I would love to see people bankrupt themselves before they become mere slaves to the glorified charities that we call banks.
> 
> The country currently does not have a banking system anyway.  Capitalism has failed.  Wake up boys!



Capitalism didn't fail its just we as a government didn't let failed businesses fail. Instead we done what a communist dictatorship would of done. If we had of let it fail like iceland we would be closer to recovery


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## ladylu

burmo said:


> You have written a very detailed post, but this part is a bit strange for me... in many cases those with significant negative equity have already signed up for the 30/35/40 repayment term. Can you please elaborate on this point?



Those who have sold most of their assets or all of their assets are being asked to pay as much as they can afford for the next 15 years and the bank will warehouse the rest of their debt that you cannot afford to repay at the moment. The idea being in the meantime you keep your remaining assets which are worth less than your 15 year debt and you probably in the future can buy out the warehoused debt for a fraction of what it is and the bank will write off the balance. But in reality that is not a fact its a hope and if you are pessimistic what happens in 15 years time when you have paid the bank off all you can afford so you retain ownership of your asset you still owe them a chunk of money and they say sorry no write off you can start over again and start repaying the balance that was warehoused. 
Whereas if you just gave up and went bankrupt you probably could buy back that asset with savings in 7 or 8 years time. And the bank will be far worse off then as they will have a much bigger write off. Then writing off the warehoused part at the start


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## ajapale

Please keep this thread to discuss Dr.Debt's first post: Why the new Personal Insolvency Act is headed for failure.

Off topic posts will be moved / removed.

aj
Moderator

Tangential discussion  Husband was asked to participate in a central bank survey about mortages moved.


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## Brendan Burgess

Hi Dr Debt

Very interesting and thought provoking post. 

I agree that the bill is _probably _headed for failure regarding the family home. 

I think it will successfully deal with unsecured debts and it certainly improves the position of people who need to go bankrupt. (Of course, for those who can travel, the UK is still the best option for bankruptcy). 

The banks have overprovided for any losses which might arise on home loans. I discuss this in this Key Post.

The banks have overprovided even more for any losses which might arise on residential investment property. 

They might need to be recapitalised for further losses on development property and business loans - I just don't know. 

Burmo makes a very good point here


> You have written a very detailed post, but this part is a bit strange  for me... in many cases those with significant negative equity have  already signed up for the 30/35/40 repayment term.



People forget this. They entered into 30 year mortgages. They may well struggle for 5 years of this period. But the economy will recover and while it will be a long time before house prices ever recover their 2007 highs, they should increase over the remaining 25 years of the mortgage. 

We tend to focus on the very bad cases. People with massive negative equity and massive arrears. But these are a small minority. Most people in negative equity are not in arrears. And 25% of those in arrears have equity in their home.  Of the 75% in arrears and negative equity, most of them are not in massive negative equity. 

Around half the problem loans have cheap trackers. The banks should not be expected to write off these without converting them to SVR loans. If the person threatens bankruptcy, the bank will simply repossess the home and relend the money at the SVR.  The bank won't care if the borrower then goes bankrupt or not. 

I have spoken to people in good jobs in heavy negative equity but who want to trade up. They think it's a disgrace that the banks won't write off their negative equity.  I have told them that the new regime is for  people who are insolvent. It is not for people who have buyer's regret. 

I hope that the new legislation will make the banks much more ready to do deals without the need for a Personal Insolvency Arrangement. You should be able to agree something with your bank on a one to one basis.  I expect that the banks will do deals. Where the borrower is unreasonable they will go for an expensive PIA and the lenders will veto it.  

Brendan


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## Jim Stafford

The Personal Insolvency Act was signed into law by President Higgins on 26 December 2012. However, it will not be effective for a number of months yet, as the new Insolvency Service needs to be fully established first.

I would not be as pessimistic as Dr. Debt and say that the Act is headed towards failure. The reality on the ground is that the banks are finally coming around to the commercial benefits of doing deals as opposed to watching their borrowers move to the UK, availing of bankruptcy and then having to appoint receivers to pick up the pieces. The Act will help to accelerate the banks towards debt resolution.


The Act will be particuraly useful to borrowers who are multi-banked, i.e. loans with two or more banks. By way of example, if a borrower owes Bank A €2m, and Bank B €1m, if he can persuade Bank A to accept a dividend of, say, 50 cent in the euro, then Bank B would also be obliged to accept 50 cent in the euro under a Debt Settlement Arrangement, as Bank A's vote is greater than the 65% threshold required by the new Debt Settlement Arrangement.

Borrowers who only owe liabilities to one bank will, in my view, not be allowed to enter into a Debt settlement Arrangement or a Personal Insolvency Arrangement by their bank. The bank will insist on hammering out their own deal with the borrower concerned, and thereby achieve a greater return by saving on the costs of the Personal Insolvency Practitioner.

Jim Stafford


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## Importer

Jim

I agree with you that the banks will try to avoid the Personal Insolvency Act,
preferring instead to try and bash out their own deals, in cases where they would have the necessary 41% veto. (or 50% / 50% in the case of a PIA)

That leaves the cases where there is more than one lender involved and no lender has the necessary 41% / 50% veto rights. I would have thought this category will be very small.

If this is true, then very few cases will manage to go through without veto and the Act will be a failure................


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## Dr.Debt

@Jim Stafford
I think in the example you gave, Bank A will veto the arrangement as they will have the necessary voting capital to do so. I do agree that in cases where there are three banks involved and lets say they are owed 1 million each, then the PIA may have a role. Otherwise I dont think the new act will have the teeth or affect that some people are counting on or waiting for.


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## Brendan Burgess

Dr.Debt said:


> @Jim Stafford
> I think in the example you gave, Bank A will veto the arrangement as they will have the necessary voting capital to do so. I do agree that in cases where there are three banks involved and lets say they are each owed 1 million, then in this type of case the PIA may have a role. Otherwise I dont think the new act will have the teeth or affect that some people are counting on.



Jim has made the very important point that _if _Bank A sees a sensible deal and agrees to it, then Bank B and other smaller creditors must fall into line with it. 

Obviously Bank A can veto a deal, but Bank B can't veto a deal which Bank A agrees to. 

Jim - it's interesting that you think that borrowers with only one lender won't get the benefit of the Act. 

Brendan


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## Time

And of course the banks will continue to use the threat of imprisonment against those who refuse to accept their own deals. PIA will not help those debtors at all.


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## Brendan Burgess

Time said:


> And of course the banks will continue to use the threat of imprisonment against those who refuse to accept their own deals. PIA will not help those debtors at all.



Hi Time

I had not heard of banks threatening imprisonment? Have you any evidence for this? 

Brendan


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## 44brendan

Banks can threaten, but have no rights to incarcerate a debtor. Time, may be referring to the potential for a debtor to be incarcerated for breaching a Court approved installment order (rarely used). As far as I am aware this is the only circumstance where a Bank can apply for commital proceedings against a defaulter.


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## Time

Correct.

The banks are continuing to use this measure against many debtors. This is evident at any district court sitting where the list for instalment orders is huge.


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## Brendan Burgess

Hi Time

A bank is fully entitled to apply for an instalment order. 

And consequently, a bank is fully entitled to tell a debtor that they will apply for an instalment order if they don't pay up.  

But they would not be entitled to threaten someone with "imprisonment".  If you are aware of such threats being made, you should report them to the Central Bank as they would be in breach of the Consumer Protection Code. 

Brendan


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## Jim Stafford

There is a maxim that states a camel is a horse designed by a committee.  I would apply a similar maxim to the Personal Insolvency Act: it was effectively designed by a committee who listened to the diverse views of the affected intersted parties, and devised a compromise document that does not fully satisfy the wishes any one group. Whilst the Act has flaws (particularly the necessity to refer every Debt Settlement Agreement or Personal Insolvency Arrangement to the Circuit or High Court, with the attendant delays and costs) it is certainly a step in the right direction.

Jim Stafford


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## Bronte

Jim Stafford said:


> particularly the necessity to refer every Debt Settlement Agreement or Personal Insolvency Arrangement to the Circuit or High Court,


 
I must have missed this.  Does the bill require one to do this?  Who is going to pay those costs?  Surely the whole purpose of this bill was to avoid court and allow agreements between banks and their debtors.


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## Jim Stafford

Bronte

The Act provides for the Insolvency Service to process the necessary paperwork through the Circuit Court (where debts are less than €2,500,00) or the High Court (where debts are greater than €2,500,000).

In effect, there is an unnecessary "triple lock" in play.  In order for a debtor to have a successful scheme, he must satisfy the following three parties:the Personal Insolvency Practitioner, the Insolvency Service and the Courts.

In the UK, they do over 50,000 Individual Voluntary Arrangments cheaply and efficiently by avoiding the court sysytem entirely.  

It will be a fact of life that the Irish system will be more costly to deal with becuase of the unnecessary involvement of the courts.  The most significant "real" cost will be the  delays at the beginning and end of the process, where the courts have to be involved.  It will be interesting to see how some of the Circuit Courts will deal with the volume of such cases, given their existing congested lists, vacation time etc

Jim Stafford


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## Bronte

I know that about a year ago I read up on this new proposed legislation and don't recall any mention of the courts. My understanding was that they were going to do the following:

Licence practitioners (solicitors or accountant or mortgage brokers even). This has not been done yet. 

Create a Personal Insolvency Service (and this has been created) PIS

I thought then that the practitioners would liase with the distressed borrower to see what assets he had and what could be proposed to a bank. And that once agreed it would be rubber stamped by the PIS. 

This is a very simplistic understanding but how do the courts come into this. Anything going to court will take ages and cost time and money.

At this stage there is nobody licenced and there are no guidelines other than the Act. So I don't see much movement on this until 2014. Anytime they set up something new it takes ages to sort it out (PRTB and property tax collection being prime examples). Also not only are there no practitioners yet, nor guidelines there is no regulations on practitioners. All this has to be very carefully thought out. 

When I've the time I'll read the legislation if it's not too long. And I'll try and dig out of AAM the documents that were printed on this, unless somebody has it handy.


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## Jim Stafford

Bronte

When the initial Heads of Bill was published there was no mention of the Courts.  The Court involvement was inserted subsequently.

I believe the new legislation should be effective within the next 6 months:  the Insolvency Service will be very busy!

Jim Stafford


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## Dr.Debt

@Bronte

Basically the flow of "things" is as follows

Debtor goes to Personal Insolvency Practitioner (PIP) and lays out his / her stall

PIP makes application for Protective Certificate from Insolvency Service Ireland (ISI)

ISI considers the application and if satisfied with it, issues the Protective Certificate and sends it, together with the application to the appropriate court

The appropriate court reviews the documentation and if satisfied formally approves the Protective Certificate.

The Registrar of the court then notifies the ISI of the Appproval or Non Approval of the Protective Certificate

If approved The ISI enters details of the approval in the register of Protective Certificates and informs the PIP that the Protective Certificate has been issued.

The PIP then informs the Creditors of his / her appointment as Personal Insolvency Practitioner and invites them to make submissions as to how the debts might be dealt with. He attaches details of the debtors financial position.He also informs them that the Protective Certificate is in place.

The PIP then prepares the debt settlement proposal and once completed calls a Creditors meeting and ALSO forwards the documents to the ISI.

If the proposal is approved at the Creditors meeting and there are no further objections, The PIP will noitify the ISI and each Creditor of the outcome. The ISI will record the approval in the register maintained by it under section 127.

The ISI will then notify the appropriate court of the approval and furnish them with a copy of the PIA.

Provided there are no complications, no objections and all the legislative criteria is met, the court will sign the PIA into effect.

Shouldnt take too long to wade through all that 
If there are any objections along the way, expect short delays


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## Time

I can still see people making the trip over the water where the system is much easier and does not require the cooperation of creditors here.


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## Kerrigan

Of course they will and who could blame them.  Who in their right mind is going hang around, jobless and become the behest of the same people who had a big part in facilitating the boom in the first place.


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## itsallwrong

While I don't agree with the mass 'its all the banks fault' point of view, if the PIA doesn't help people out the way it should, 
then of course it fails and mass overseas insolvency begins. And we are back on the topic of handing the bill to the taxpayer. 
Shame this whole mess is getting kicked down the road and the punter is still on the fence.

I truely hope people leave by the ferry load and go insolvent abroad if it doesn't help them.
Tired of half measures of dealing with this mess.
Picture a banker and a politician with a finger stuck in a leaking dam ...


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## Bronte

Dr.Debt said:


> @Bronte
> 
> Basically the flow of "things" is as follows


 
Now I kinda get it as I've read your post and then the summary to the legislation for the first part, debt relief notices.  Very bureaucratic.  

Also Brendan posted up a thread about 'new' court appointments which I didn't read but realised yesterday that that thread was about personal insolvency. 

Still it's not clear what the courts are actually going to do but I'll continue to read the summary.

BB did anyone do a summary of each of the 4 parts to the legislation?  I think each part has to be tackled separately.  As key posts one assumes.


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## Jim Stafford

Bronte

I attach a summary below of the new Act:

*PERSONAL BANKRUPTCY ACT 2012 *
The Government initially published the Personal Insolvency Bill on 25 January 2012, and re-issued an updated version of the Bill on 29 June 2012. The Personal Bankruptcy Act 2012 itself was signed into law by President Higgins on 26th December 2012.

*Insolvency Service 
*The Personal Insolvency Act 2012 Act provides for the establishment of an Insolvency Service.

*Debt Relief Notice 
*The Personal Insolvency Act 2012 provides, subject to certain conditions, for a Debt Relief Notice of forgiveness for persons with no assets and no income that are unable to meet qualifying debts totalling not more than €20,000. The purpose is to create an efficient non-judicial means of allowing persons to resolve unmanageable unsecured debt problems. (Similar systems operate in the UK, Northern Ireland and Australia).
With the assistance of an approved intermediary the debtor may apply to the Insolvency Service to certify that the qualifying debts be frozen for one year following which if, the person still cannot pay, the Service will certify that the debt is written off.
General conditions for a DRC 
• debtors would have qualifying debts of €20,000 or less;
• debtors will have a net monthly disposable income of €60 or less after provision for “reasonable” living expenses;
• debtors would hold assets (separately or jointly) to the value of €400 or less (one vehicle up to value of €2,000 would be exempt from the asset test, as would household assets and tools or other items of equipment up to a value of €6,000, and one item of personal jewellery up to a value of €750);
• debts qualifying for inclusion in a DRC are unsecured debts: e.g. credit card, personal loan, catalogue payments, etc;
• debts that will not qualify for inclusion in a DRC include: secured debt, court fines, and family maintenance payments.
Where a DRC has been granted by the Insolvency Service 
• it will be formally registered;
• a further DRC cannot be applied for before 6 years has elapsed;
• a DRC may not be availed of more than twice;
• there is a restriction on the debtor from applying from further credit.

*Debt Settlement Arrangements 
*The Personal Insolvency Act 2012 provides for a system of Debt Settlement Arrangements (DSA) between a debtor and two or more creditors to repay an amount of unsecured (consumer type) debt over a set period. The DSA would assist persons who have an income and assets and debts that exceed the threshold (€20,000) for a Debt Relief Certificate. With the required assistance of a personal insolvency trustee, the debtor may apply to the Insolvency Service for a Protective Certificate in respect of preparation of a DSA. If granted, the Certificate would provide for a standstill period during which creditors may not take action against the debtor. The trustee would then put forward a DSA to creditors for agreement. If approved, the Insolvency Service would provide formal registration of the DSA. At the satisfactory conclusion of the DSA all debts covered by it would be discharged. The Insolvency Service has no role in the negotiation and agreement of a DSA. (Similar systems operate in the UK, Northern Ireland and Australia).
General conditions for application for a DSA 
• the debtor must normally be resident in the State or have a close connection.
• only one application for a DSA is permitted in a ten year period.
• a Protective Certificate, if granted, will provide a standstill period of 30 working days to allow for a creditors meeting to consider the DSA.
• a DSA will normally runs for 5 years.
• the DSA requires the approval of 65% in value of qualifying creditors.
• a DSA if approved, it is binding on all creditors.
When a DSA has been agreed with creditors 
• the DSA will come into effect on registration by the Insolvency Service.
• the DSA may be varied or terminated.
• there may be an application for adjudication in bankruptcy on ending, termination or failure of the DSA.
• there are grounds for challenge by creditors to a DSA and a role for the courts on application to have a DSA annulled.

*Personal Insolvency Arrangements 
*The Personal Insolvency Act 2012 provides for a system of Personal Insolvency Arrangements (PIA) between a debtor and one or more creditors to repay an amount of both secured and unsecured debt over a period of 6 years (with a possible agrred extension to 7 years)
General conditions for application for a PIA 
• A debtor will only be able enter into a PIA once in his lifetime
• A debtor may only propose a PIA if he or she is cash flow insolvent (i.e. unable to pay their debts in full as they fall due) and it is unforeseeable that over the course of a period of time the debtor will become solvent
• A debtor may only propose a PIA if a DSA would not be a viable alternative to restore the debtor to solvency over a five year period
• It will deal with debts between €20,001 and up to a ceiling of €3m. The €3m cap can be waived with the written consent of all secured creditors.
• A Personal Insolvency Practitioner, operating in a manner that is fair to all parties and having considered the full financial circumstances and advised the debtor, will make the PIA proposal to creditors and if accepted by creditors will then administer the PIA for its duration
• A PIA will normally run for 6 years
A PIA must be supported by at least [65%] of creditors and at least [50%] of secured creditors and [50%] of unsecured creditors in terms of value
When a PIA has been agreed with creditors
• To the extent that they are not provided for in the PIA, all other debt obligations will remain 
• Creditor objections to a PIA may be taken to the Circuit Court on stated grounds 
• A PIA may be varied or terminated
*Bankruptcy 
*The Personal Insolvency Act 2012 provides for a number of amendments to the Bankruptcy Act 1988 to provide for a more enlightened, less punitive and costly approach to bankruptcy. These amendments continue the reform of bankruptcy law begun in the Civil Law (Miscellaneous Provisions) Act 2011.
The main elements of the bankruptcy reforms include the following: 
• The introduction of a minimum debt amount of €20,000 in respect of a creditor petition for bankruptcy;
• The automatic discharge period from bankruptcy (subject to certain conditions) is reduced from the current 12 years to 3 years after the date of adjudication*;
• The discharge from bankruptcy could be delayed by the court, up to a maximum of 8 years, for non-compliance, fraudulent or dishonest behaviour by the bankrupt during the process;
• Full disclosure and realisation of all the bankrupt’s assets and interests would be required for the benefit of creditors, etc;
• Provision for a court to make a payment order requiring the discharged bankrupt to make certain payments in favour of creditors, allowing for reasonable living expenses, for a period of up to five years
• Extended timeframes in regard to possible fraudulent transfers or settlements of assets by the applicant for bankruptcy (from 1 year to 3 years)
*With regard to the reduced period for automatic discharge from bankruptcy, in addition to any existing technical and other conditions contained in the 1988 Bankruptcy Act, the following new provisions contained in the Scheme of the Bill would also apply:
- in a new section (Automatic discharge from bankruptcy) that the bankrupt shall after discharge from bankruptcy have a duty to cooperate with the Official Assignee in the realisation and distribution of such of his or her property as is vested in the Official Assignee.
- in a new section (Objection to automatic discharge from bankruptcy) that the Official Assignee or a personal insolvency trustee shall have an explicit power to object to the discharge of a person from bankruptcy. The primary grounds for such objection are evidence as to the bankrupt’s lack of cooperation, dishonesty or other wrongful conduct. The court, if satisfied, as to the evidence may suspend the discharge pending further investigation or extend the period before discharge of the bankrupt up to a maximum of 8 years.
(It should be noted that there are no prohibitions contained in the Bankruptcy Act 1988 with regard to restrictions on the nature of employment or profession of a person adjudicated bankrupt. Such prohibitions, where they exist, are contained in sectoral legislation, e.g. in the Electoral Acts in regard to membership of Dáil Eireann or in contracts of employment, e.g. in the legal profession).
*What will people be allowed to live on?*
The Insolvency Service is a body set up to ensure that the Personal Insolvency Legislation is administered in a fair and structured manner. In due course the Service will provide guidelines on what are considered reasonable living expenses, with criteria such as children and medical conditions being taken into account. The Vincentian Partnership for Social Justice has developed a minimum income standard calculator which is available online at their web site (I am unable to post  the link to the web site under the current rules of AAB) and gives realistic estimates of how much money people require to maintain a basic standard of living.
Once the Insolvency Service provides guidelines on what are reasonable living expenses, it is expected that that in any Debt Settlement Arrangement, Personal Insolvency Arrangement or Bankruptcy any income earned above what is required to pay reasonable living expenses will be used to pay creditors.
*Comparision of UK Bankruptcy with Irish Bankruptcy*
The advantages of debtors moving to the UK and utilising the Bankruptcy procedure in the U.K. are obvious. Firstly, the U.K. has a tried and tested system of Individual Voluntary Arrangements (“IVA”) which allow debtors to do deals with their creditors on a low cost basis. The U.K. does approximately 50,000 IVA’s every year. If the IVA is not successful, then the debtor is placed into bankruptcy, but at least he is discharged after a bankruptcy period of just 12 month, which compares favourably with the proposed three years discharge period in Ireland.

One of the key planks of the new proposed Irish bankruptcy regime is a Personal Insolvency Arrangement (“PIA”) which is effectively modelled on the U.K. IVA system.

The reason why IVA’s are so successful in the U.K. is that creditors receive more money back than they do under a Bankruptcy. Similarly, it is expected that under a PIA, that creditors would receive more money back than under bankruptcy.

While the proposed Irish PIA will be closely modelled on the U.K. IVA system, there will still be substantial differences between the actual bankruptcy regimes of each Country. In the U.K., when a debtor is declared bankrupt, the Official Receiver is initially appointed. The Official Receiver is a Government Official whose costs are effectively financed by a levy on all realisations in a bankruptcy. In practice, if the bankrupt estate has realisable assets, the Official Receiver will hand it over to a private sector Insolvency Practitioner who will charge fees on a time cost basis. In Ireland, the Official Assignee, also a Government Official, is initially appointed, and he tends to complete the bankruptcy. The Official Assignee does not charge fees himself, but Court Duty is levied on asset realisations.

A major difference between the Irish bankruptcy regime and the UK bankruptcy regime is the involvement of the court system. In Ireland, there is a constant interface with the Court system, which is costly in terms of solicitor and counsel fees. 

Jim Stafford


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## marfsmal

Would the DCN be supervised for 1 year or 3 years? It was meant to be 3 years. Any change?


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