The Personal Insolvency Act 2012 was signed into law on 26 December 2012. As of 31 July 2013, all sections of the Act (save for Part 4 which relates to bankruptcy) had been commenced by ministerial order.
In our Spring Insolvency Update, we provided an overview of the main provisions of the Personal Insolvency Act 2012. Here we provide an update on some recent developments relating to the legislation.
A Debtor’s Perspective
Debtors wishing to avail of a debt settlement regime under the Act must seek advice from an authorised Approved Intermediary (AI) or Personal Insolvency Practitioner (PIP) to ensure that they satisfy certain eligibility criteria. Subject to meeting these criteria, a variety of restructuring options are potentially available, including, for example, extensions of repayment timeframes; debt write-offs; write-downs of negative equity; split mortgages; and alterations to interest rates.
The AI or PIP retained by the debtor will advise on the best available options on the basis of the individual debtor’s personal and financial circumstances.
A Creditor’s Perspective
Creditors must ensure that they have proper systems and procedures in place to process applications received from debtors for any of the three new debt settlement regimes provided for under the Act. While active participation in the process itself will not guarantee that a creditor’s position will not be adversely affected, it will at least permit creditors to minimise potential losses insofar as possible in the circumstances.
All creditors (including secured creditors, unsecured creditors, guarantors, landlords, receivers and mortgagors in possession) should ensure they are fully informed of the statutory restrictions on creditors seeking to recover a debt during the currency of any of the debt settlement regimes provided for under the Act. Creditors should also be aware of the provisions relating to submissions, proof of claims, security valuations, participation at creditor meetings, voting rights, appeal entitlements and statutory time-frames.
The Insolvency Service of Ireland
The Insolvency Service of Ireland (ISI) started accepting applications for Debt Relief Notices and Protective Certificates for Debt Settlement Arrangements and Personal Insolvency Arrangements on 9 September 2013.
The ISI has also released guidelines on what might be considered to be “reasonable living expenses” and has published various ‘scenario packs’ illustrating how each of the three new debt settlement regimes provided for under the Act will operate in practice.
Qualification and Supervision of AIs & PIPs
The ISI has made various Regulations prescribing the qualification criteria, licensing requirements and regulatory standards relating to both Approved Intermediaries (AIs) (dealing with Debt Relief Notices) and Personal Insolvency Practitioners (PIPs) (dealing with Debt Settlement Arrangements and Personal Insolvency Arrangements).
The ISI has also published a list of authorised AIs and PIPs. As at the date of publication, eight persons have been authorised to act as AIs and 49 have been authorised to act as PIPs, although it is understood that over 100 applications for PIP licences have in fact been received by the ISI.
A list of authorised AIs and PIPs is available on the ISI website.
Six specialist judges have been appointed to the Circuit Court, which has specific jurisdiction to deal with applications under the Act where the debtor’s total liabilities are €2.5 million or less. Where a debtor’s liabilities exceed this amount, applications under the Act must be made to the High Court.
Part 4 of the Act makes a number of significant changes to the Irish bankruptcy regime. This part of the Act is expected to be commenced by ministerial order shortly.
The most significant of these changes is the substantial increase in the “look-back” periods. In respect of fraudulent preference, the look-back period will be extended from one to three years, during which time certain transactions remain potentially at risk of being set aside in the event of a debtor becoming bankrupt. In such circumstances, a creditor may be forced to repay any monies received during that period to the Official Assignee. The look-back periods in respect of fraudulent/voluntary conveyances will increase from two to three years.
It is estimated that between 3,000 to 4,000 applications for Debt Relief Notices and approximately 15,000 applications for Debt Settlement Arrangements and Personal Insolvency Arrangements will be made in the first year of the new insolvency regime coming into practice.