THE GOVERNMENT has today published its long-awaited new laws which aim to overhaul Ireland’s bankruptcy regime and help struggling mortgage holders out of debt.
The Personal Insolvency Bill 2012 allows for some debts, like mortgages, to be written down in certain cases where the lender agrees it is unlikely that they will recoup the entirety of their loan.
Under the proposals, a person with debts of between €20,000 and €3 million can enter a ‘Personal Insolvency Arrangement’ (PIA) if they are insolvent. A person in a PIA would then have their debts taken over by a trustee who will propose a deal with creditors.
Borrowers who owe less than €20,000 will be able to apply for a ‘debt relief certificate’ which will see those debts wiped off if they remain unpaid after a three-year ‘freezing period’.
Borrowers can also seek a Debt Settlement Arrangement where they would agree to settle their unsecured debts over a five-year window.
If the debtors do not agree to the arrangements, the borrower can then seek to declare themselves bankrupt – with the law proposing to reduce the minimum discharge time from 12 years down to three.
The discharge could still be delayed by the courts, however, if they believe the bankrupt party has been dishonest at some point during the process.
In order to ensure formal legal oversight, a Circuit Court judge will have to approve all settlements reached under the legislation.
Publishing the bill today, justice minister Alan Shatter said the measures were “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”.
The legislation, originally approved by cabinet in January, marks one of the main requirements under the EU-IMF bailout deal.