Minister for Justice, Alan Shatter will unveil details for radical reform of Ireland's bankruptcy rules before Government today, 24 January 2012. It is understood that the proposals will seek to tackle consumer debt and will involve three distinct debt settlement arrangements and a three-year bankruptcy regime.
The three non-judicial proposals are part of a broader range of reforms to aid struggling borrowers as recommended in the Keane report published by the Government last September (http://www.finance.gov.ie/documents/publications/reports/2011/mortgagearr2.pdf).
The first measure will be a one-year Debt Relief Certificate, which will cover unsecured borrowings of up to €20,000. Unsecured borrowings are those borrowings which do not attach to a property, such as credit card bills, car loans, etc. The Certificate must be approved by an insolvency service and an independent intermediary.
The second measure will be a Debt Settlement Arrangement lasting for five and in some cases six years. This will cover unsecured borrowing of over €20,000. Secured debts are also excluded from this measure.
The third measure will be a Personal Insolvency Arrangement which will cover secured and unsecured debts of over €20,000. This measure will last for a maximum of six and sometimes seven years and includes mortgages and other secured borrowings. It is this option that is likely to have most impact on consumers who are struggling to repay their debt.
The three options will require agreement from banks and borrowers and in this sense it is a voluntary process. Further detail is awaited to see how these options will roll out in practice and what system will be in place for repayment of the debt.
The final option is bankruptcy which will require a judicial application and will result in the person being restricted for a period of three years before discharging the bankruptcy. This is a significant development as, under the existing bankruptcy laws, a bankrupt must wait 12 years before being discharged from bankruptcy. If such a measure is introduced, it is likely to reduce the possibility of forum shopping and bankruptcy applications being made by Irish individuals in other countries such as the UK where the period of insolvency is only one year.
Publication of the personal insolvency legislation is expected in April 2012.
This article is a general summary on the subject and is not intended to be a thorough review or as a complete statement of the law. Specific legal advice should be sought on a case by case basis.
For further information, contact Crowley Solicitors Cork - Deirdre Crowley at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . You can also contact Deirdre on +353 21 4289 560.
