15,000 people to avail of personal insolvency laws

As many as 15,000 people will, within 12 months, avail of the mechanisms in new personal insolvency legislation before the Oireachtas, it has been claimed.

Next month’s Personal Insolvency Bill will offer secured borrowers and lenders in arrears a reasonable alternative to bankruptcy, says one respected analyst.

Fergus Doorly, insolvency and corporate recovery partner with William Fry law firm, told 150 bankers and financiers in Dublin yesterday that the bill will see the mandatory bankruptcy period cut from 12 to three years in Ireland.

“The personal insolvency bill will allow people to resolve debt issues in a way that balances the rights of creditors and debtors. It is expected that over 15,000 people will avail of the mechanisms set out under the new legislation within its first year,” he said.

Mr Doorly believes the legislation will bring Ireland closer to the one-year restrictions imposed in the UK. Mr Doorly’s talk was focused on the bill’s third mechanism, the Personal Insolvency Arrangements (PIA).

Mr Doorly said: “Of the three, it is the PIA that will affect secured lenders and secured borrowers in arrears. The aim of the PIA is to provide a reasonable alternative to bankruptcy while, where possible, leaving the borrower with their house and an affordable mortgage payment.

“In order to qualify for a PIA, the secured liabilities of the creditor must not exceed €3m. The cap of €3m is something that may limit the effectiveness of the legislation as it reduces the number of people who can avail of it.”

Meanwhile, guest speaker Toby McMurray, a partner at Tughan’s law firm in Belfast, outlined similar reforms to bankruptcy law introduced in the UK.

“With the bankruptcy period in Ireland at three years versus that of only one year in the UK, debtors will still explore the possibility of availing of the bankruptcy laws in the UK,” he said.