Shatter publishes long-awaited Personal Insolvency Bill

Long-awaited legislation on personal insolvency has been published today by Justice Minister Alan Shatter.

"The development of modern insolvency law is in line with the commitments in the Programme for Government and the EU/IMF Programme of Financial Support for Ireland," Minister Shatter said.

"This is a very significant Bill providing for a comprehensive reform of insolvency law.

"It provides new and more flexible options to address the circumstances of insolvent debtors."

The main provisions of the Personal Insolvency Bill 2012 establish new, non-judicial debt resolution processes.

· a Debt Relief Notice to allow for the write-off of qualifying debt up to €20,000, subject to a three year supervision period;

· a Debt Settlement Arrangement for the agreed settlement of unsecured debt over 5 years;

· a Personal Insolvency Arrangement for the agreed settlement of secured debt up to €3m (though this cap can be increased with the consent of all secured creditors) and unsecured debt over 6 years.

The Bill provides for the appointment of Personal Insolvency Practitioners for these insolvency arrangements, but both creditors and debtors will have the power of veto over any suggested arrangement, and Circuit Court approval will be required in every case.

"Everyone in a sense has a veto," Minister Shatter said, "in that if a debtor is not happy with the proposal made based on the work done by the personal insolvency practitioner, and if the debtor doesn't believe that the arrangement is financially workable, the debtor is as entitled to reject the arrangement as are the creditors."

Failure to agree a suitable non-judicial debt settlement between debtors and creditors will leave open the option of debt enforcement or judicial bankruptcy.

The Bill also proposes to cut the bankruptcy period from 12 to three years "to provide for a more enlightened, less punitive and costly approach to bankruptcy".

"The critical new element is the introduction of automatic discharge from bankruptcy, subject to certain conditions, after three years as opposed to 12 years at present," Minister Shatter said.

"This development moves Ireland to the European norm for such discharge."

The legislation - which runs to over 200 pages - is aimed in part at dealing with Ireland's mortgage arrears crisis and follows a number of reports recommending reform in this area, notably the October 2011 Keane report and a December 2010 report by the Law Reform Commission.

"This Bill is 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 having regard to the financial reality of an individual’s true circumstances," Mr Shatter said.

However he stressed that the Bill does not provide for the automatic writing-off of negative equity, where such may exist.

"Where a person is in a position to service their mortgage or other debt obligations, they must continue to do so," Minister Shatter said.

"This Bill does not relieve solvent debtors of their responsibility to meet their contractual obligations."

He stressed that anyone experiencing difficulties in regard to mortgage arrears should engage with their lenders so as to seek a satisfactory solution and also emphasised the importance of lenders constructively engaging with customers in genuine financial difficulty.

"The protections afforded under the Central Bank Code of Conduct on Mortgage Arrears will continue to be available to co-operating borrowers," Minister Shatter added.