Eire Takes Action on Personal Insolvency Laws | Finance @ Redbright

Inside this year the Irish government is supposed to pass new personal insolvency laws. A final draft of a Personal Insolvency Bill is expected to be released by the end of April 2012, a month after the EU, ECB and IMF had formerly asked, as a condition of Ireland?s bailout. The first draft of the legislation was released at the end of January 2012 and a process of consultation is presently ongoing with interested groups and individuals. The stakes are high and many consumers are troubled that there might be a lack of balance in the measures that may be ultimately enacted if lenders particularly have too significant a say in finalizing the laws. The draft legislation is now being compared to existing EU law and practice and there are a lot of obvious differences from mainstream insolvency legislation in the UK and in the rest of the EU. The draft bill comprises four main personal insolvency options. The government?s approach looks to be that private indebtedness ought to be classified in accordance with the magnitude of the liabilities; the type of the indebtedness i.e. secured or unsecured debt; the magnitude of the debtor?s income, the worth of the debtor?s property and the prospects for the debtor becoming solvent over a foreseeable time period. The first three solutions are completely new in Ireland and the fourth option consists of just some minor changes to the old bankruptcy legislation. Here?s a review of the four draft proposals as they are right now and a short description of a fifth method of managing debt problems is also given at the end, although it is not contained in the steps being proposed under the the latest draft legislation.

Debt Relief Certificate ? The Debt Relief Certificate is quite similar to the Debt Relief Order in the UK and applies to individuals whose income is modest, who have almost no property and whose personal financial obligations are at a fairly small level. So long as obligations do not go higher than 20,000, the value of assets doesn?t surpass 400 (aside from a vehicle of maximum worth 1,200) and monthly disposable income doesn?t go over 60, then the debtor may be eligible for a Debt Relief Certificate for which they can apply with the help of an authorized intermediary. The all inclusive costs of applying for a Debt Relief Certificate is 90. If an applicant meets the essential criteria for the Debt Relief Certificate they will see all their debts frozen for one year. If the applicant?s circumstances have not materially improved and he or she is still unable to pay the money they owe after twelve months, debts that qualify are completely cancelled. A minimum of six years must elapse before a debtor is permitted to make application for a second Debt Relief Certificate and citizens are allowed only two Debt Relief Certificates in their lifetime. This solution will not be available to homeowners.

Debt Settlement Arrangement ? The Debt Settlement Arrangement is very like the IVA in the UK. Application for a Debt Settlement Arrangement can be made by an insolvent debtor who?s got entire unsecured obligations of over 20,000. With the assistance of a personal insolvency trustee, the consumer can apply for a protective certificate while the Debt Settlement Arrangement is being got ready. This forbids creditors from undertaking any measures for the recovery of debts for thirty working days. According to this scheme creditors are sent a Debt Settlement Arrangement proposal providing for payments to be made by the borrower for a duration of five years. Creditors may consent to prolong this period for a further twelve months. This repayment will only be a percentage of what is actually due. For the Debt Settlement Arrangement to be approved, no less than 65% of voting lenders must support it. Lenders are accorded voting privileges strictly in accordance with the sum of their debts. All lenders are bound by the decision of those lenders who choose to exercise their vote.

Personal Insolvency Arrangement ? There?s no consumer debt remedy in the UK that is actually very similar to the Personal Insolvency Arrangement. This is because the Personal Insolvency Arrangement deals with secured debt as well as unsecured debt in an innovative and new way. This option refers to insolvent individuals whose total secured and unsecured liabilities total greater than 20,000 and total less than 3million. With the assistance of a personal insolvency trustee, the consumer can apply for a protective certificate while the Debt Settlement Arrangement is being got ready. This thwarts lenders from undertaking any steps for the recovery of outstanding debts for sixty days. Unsecured lenders are offered an agreed percentage of what they are owed and an offer to pay this over a fixed period is made. If the person in debt is in adverse equity in regard to one or more secured properties for instance a mortgaged home, the proposal could include provisions for writing down a portion of the mortgage, and for lowering mortgage payments by extending the repayment period for a number of additional years. For the Personal Insolvency Arrangement to be accepted, the applicant will require the support of at least 65% ( in terms of value) of all voting lenders both secured and unsecured. In addition at least 75% of secured creditors who choose to vote and at least 55% of unsecured creditors who choose to vote must vote in favour of the Personal Insolvency Arrangement proposal. The Personal Insolvency Arrangement will normally operate for a term of six years but it may be extended by an additional year. A debtor may enter into a Personal Insolvency Arrangement only once in his or her lifetime unless exceptional or other external factors caused the debtor?s insolvency.

Bankruptcy ? Amendments to the old Bankruptcy Laws are the final changes proposed to be made in the new Personal Insolvency Bill. One effect of these changes is that, if an insolvent debtor owes less than 20,000, a creditor won?t in future be able to petition a court for bankruptcy although such insolvent individuals may themselves petition for bankruptcy. If a bankruptcy order is made, all of the assets of the individual will fall under the power of an Official Assignee (OA) and the debtor may have to make payments from their surplus income to the OA for between three and eight years. Regardless of how long the payments from income go on for, automatic discharge from bankruptcy can take place after three years. This is considerably less than the minimum of twelve years that it currently takes for discharge from bankruptcy in Ireland.

Debt Management Plan ? The draft bill recently published by the Irish Government incorporates no legislative proposals relating to informal debt management. This is rather surprising since the most widespread personal debt solution currently available in Ireland is the Debt Management Plan. A Debt Management Plan is an informal but flexible debt solution whereby the consumer offers to pay lenders what they can afford. The affordable payment is what is left from income after all living costs are considered. Living costs are based on agreement between creditors and debtors in accordance with standards and guidelines largely developed by the lenders. The term of a Debt Management Plan can be quite long but since it is informal, the consumer or any lender can decide to opt out at any stage. While lenders often agree to freeze interest and penalties while the Debt Management Plan is running, this is not assured. Even when such a freeze is agreed, if the Debt Management Plan ceases to run, creditors will normally and typically re-impose penalties and charges on any remaining unpaid amounts of funds due to them.

Outstanding debts in Ireland can now be resolved with several different debt schemes coming on board, including the Personal Insolvency Arrangement and the Debt Management Arrangement. National Debt Relief can help provide you with information on these solutions and help you with your financial troubles.

Source: http://finance.redbright.co.za/eire-takes-action-on-personal-insolvency-laws/

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