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The Irish government has published in draft form its Personal
Insolvency Bill, to which it gave a commitment under the
EU/International Monetary Fund Programme of Financial Support for
Ireland.
The bill is to modernise the bankruptcy of individuals and to
provide for non-judicial debt settlement systems.
Under the existing law, a bankrupt individual is discharged
after 12 years, with liberty to apply after five years if the
assets have been realised and preferential payments are
covered.
The bill proposes to reduce the date for automatic discharge to
three years, with power of the court to extend the three years to
eight years if there has been wrongful conduct on the
bankrupt's part.
The bill also affords the court discretion to make an order
requiring the discharged bankrupt to make payments from his or her
income for the benefit of creditors for a period lasting up to five
years from the date of the discharge. It is stated that the court
should have regard to the reasonable living expenses of the
bankrupt and his or her family, and to guidelines on reasonable
expenditure and essential income for debtors to be published by the
proposed Insolvency Service.
A concern has been expressed by some that if the draft bill is
not changed in that regard, persons might still seek to move their
centre of main interests (COMI) to Northern Ireland to avail of the
bankruptcy regime in the United Kingdom, with possibility of income
payments for three years and discharge after one year. This is
allowing that any change of COMI – where the debtor
conducts the administration of his or her interests on a regular
basis – must involve a real change that is both objective
and reasonably ascertainable by third parties in some (although not
all) cases involving notice to creditors.1
In addition, the bill proposes to extend from one to three years
the period prior to an individual's bankruptcy, while he or she
was unable to pay all of his or her debts, during which preference
of creditors is declared void.
The bill also proposes three new non-judicial debt settlement
systems for individuals:
a debt relief certificate applied for through an approved
intermediary to allow persons with very limited means to fully
write off qualifying unsecured debt of up to €20,000,
generally after a one-year moratorium period. It is proposed that
this process cannot be utilised again for six years and cannot be
availed of more than twice;
a debt settlement arrangement for the agreed settlement of
unsecured debt that is over €20,000. This entails a
personal insolvency trustee putting a debt settlement arrangement
to creditors requiring payment in full of preferential creditors
and agreement by a 65% majority of other voting creditors. A
protective certificate to prevent enforcement for 30 days is to be
obtainable from the proposed Insolvency Service. It is proposed
that the debt settlement arrangement process cannot be used again
for 10 years; and
a personal insolvency arrangement for the agreed settlement of
both secured and unsecured debt between €20,000 and
€3 million by a person who is unable to pay his or her
debts as they fall due. This entails a personal insolvency trustee
making a personal insolvency arrangement proposal to creditors
requiring payment in full of preferential creditors and agreement
by a 65% majority of voting creditors with 100%, or possibly 75%,
of the secured creditors (with any writedown not to reduce
principal below the value of the security) and 55% of the unsecured
creditors. A protective certificate to restrain enforcement for 40
to 60 days is to be obtainable from the proposed Insolvency
Service. It is proposed that the personal insolvency arrangement
process can be utilised only once in a lifetime, unless there are
exceptional factors outside the debtor's control.
The bill contains a novel provision in relation to the
procedures for the conduct of creditors' meetings, which
provides that regulations could be made permitting a meeting to be
held other than in the form of a physical meeting (ie, voting by
telephone or electronically by email or online).
The final form of much-needed legislation for indebted
individuals is awaited. The government's efforts heretofore
have primarily been focused on the sovereign obligations of the
Irish state and the nationalised indebtedness of banks.
Footnote
1 See Irish Bank Resolution Corporation v Sean
Quinn – judgment of Deeny J, January 10 2012, High
Court of Justice in Northern Ireland.
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