Plans to reduce cost of becoming bankrupt

Justice Minister Frances Fitzgerald has said she hopes to "shortly" be able to announce a reduction in the cost of becoming bankrupt, though her department would give no indication as to the size of the cut being considered.

The move comes on the back of low numbers availing of the Insolvency Service of Ireland.

“The uptake of the new formal insolvency solutions provided under the Personal Insolvency Act has, so far, been substantially slower than expected,” Ms Fitzgerald said. “This is a matter of concern.”

She said research by the Insolvency Service had confirmed three “obstacles” to the uptake of the measures, which include personal insolvency arrangements and debt settlement arrangements.

“Firstly, up-front charges for insolvency and bankruptcy seem to be a barrier in practice in the Irish context, even though they are largely equivalent to those charged in other jurisdictions,” she said.

“Secondly, it would appear that many people are struggling to pay their debts unaided, and feel ashamed — which, of course, they should not — to seek an arrangement of any kind.

“Thirdly, people stressed by serious debt problems easily become isolated from mainstream media, and many have not been aware that insolvency solutions can help them.”

Ms Fitzgerald also defended the Insolvency Service and said it made a vital impact as it “opened up the conclusion of informal debt deals between debtors and creditors”.

She said: “Creditors were not offering debt restructuring deals to people struggling with debt, even at the informal level, before the Insolvency Service opened its doors. Now they are. That is a key change.”

She said a number of measures were already being taken by the Insolvency Service to make its packages more attractive to members of the public who find themselves insolvent, including the waiving of all fees previously payable to either the service itself or the courts by a debtor who applies for any of the debt solutions available under the Personal Insolvency Act.

Ms Fitzgerald added that the Insolvency Service “has also announced it will provide a contribution of €750 to defray the cost of a personal insolvency practitioner, if a reasonable insolvency proposal by a debtor is refused by creditors”.

“The debtor should not be faced with a bill arising from the creditor’s refusal in this situation. I hope to shortly be in a position to also announce reductions in bankruptcy costs,” she said.

When contacted, her department would not comment on how big a reduction is envisaged or give explicit reasons why the step was being taken.

“Minister Fitzgerald will be making an announcement on this issue shortly,” a spokesman said.