The Government’s new personal insolvency legislation has been introduced in an effort to tackle the massive debt crisis in the country.
A person applying for a PIA has to hire a PIP who will put together a full statement of financial affairs for that individual including a complete list of all assets and liabilities. The PIP will then apply to the court for a protective notice for the PIA candidate before putting together a repayment schedule that will last five years in the event of unsecured debts and six years in the event of secured debts, which is mainly mortgage debt.
The debtor has to accept the repayment schedule before it is put to all the creditors for approval. The aim of the legislation is to put the debtor’s mortgage repayments on a sustainable footing. All remaining income under a revised payment schedule will then go towards paying unsecured debt, which includes credit card loans and credit union loans.
At the end of the five or six year period, all remaining unsecured debts are discharged. Mr McAteer says that PIAs have a much better chance of dealing with multi-distressed borrowers than the Central Bank’s pilot scheme for multi-debt restructuring, which was announced in May, because participation by creditors in this scheme is voluntary.
However, the ultimate success of the PIA legislation depends on PIPs coming up with credible repayment schedules and creditors taking a realistic approach to a debtor’s problems.
“Ultimately, if the creditors do not accept a PIA then the debtor will be forced into bankruptcy and that way the creditors will end up losing much more.”
However, even with the introduction of personal insolvency legislation, it is inevitable that some debtors will have to opt for bankruptcy because of the size of their debts, adds Mr McAteer. He believes the number of bankruptcy cases will rise to 2,000 to 3,000 in the coming years.