The Personal Insolvency Bill

by Noelle McDonald

The unexpected inclusion for the provision of secured debt in the Government’s new draft Personal Insolvency Bill (PIB) will come as a huge relief to homeowners in mortgage arrears.  However only those who are eligible can fulfil the criteria will be able to avail of the new out of court debt settlement arrangements proposed in the draft Bill.

What does the Bill cover?

  1. The Bill establishes for the first time, three out of court settlement mechanisms that allow borrowers resolve personal debts
  2. It radically reduces the period for discharge from bankruptcy from 12 years to 3 years 
  3. It establishes a new independent state funded Insolvency Service

What are the options and who can avail of them?

  1. Debt Relief Certificate (DRC):  This option is available to borrowers who are unemployed, have no assets and whose unsecured debts are less than €20,000.  The procedure involves an approved intermediary such as MABS, submitting an application to the Insolvency Service on behalf the borrower.  If approved, the borrower’s debts are frozen and written off after one year.  Borrowers can only apply for this relief twice in their lifetime. 
  2. Debt Settlement Arrangement (DSA):  This option applies to borrowers with unsecured debt in excess of €20,000.  The objective is to settle the debt within a 5 year period and the procedure involves a personal insolvency trustee submitting a proposal to the Insolvency Service.  Provided 65% of the creditors approve the terms of DSA and the borrower pays the settlement, the reminder of the debt will be written off after 5 years.  Borrowers can only apply for this relief once every 10 years.
  3. Personal Insolvency Arrangement (PIA):  This arrangement applies to borrowers with secured and unsecured debt between €20,000 and €3 million.  The objective is to settle the debt within a 6 year period.  The borrower must be insolvent with no prospect of becoming solvent within 5 years.  Provided 65% of the creditors approve the terms of PIA and the borrower pays the arrangement, the reminder of the debt will be written off after 6 years.  A borrower can only avail of a PIA once in their lifetime.
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