The Personal Insolvency Bill was enacted into law on 26th December 2012.
An Insolvency Service is currently being set up to administer the legislation. Lorcan O’Connor has been appointed Director designate of the Insolvency Service.
It will be some months before the first insolvencies can be registered with the Service, but it is likely that an initial trickle of applications will increase greatly in the coming months and years.
Debts of up to €20,000 will be dealt with by “approved intermediaries”. These are likely to be persons employed my MABS, the Money Advice Budgeting Centre.
Proposals in respect of larger debts will be compiled and agreed between debtors and creditors by personal insolvency practitioners ( PIPs).
The qualifications for PIPs haven’t yet been published, but the Director Designate said recently that such persons must possess a deep understanding of the legislation, be sufficiently numerate so as to be able to compile financial proposals, and have the experience to prepare proposals which are acceptable to creditors and debtors and which have a good prospect of success. PIPs will be required to hold professional indemnity insurance (a bond is not now required).
Quite a number of amendments were made during the various stages of passage through the Dáil and Seanad. Many of these were minor, but a few significant changes were made over Christmas, including:
Pensions
Section 51(2) of the Act prescribes that pension “income or an amount of money other than income” are to be included as income or capital of the debtor, where the debtor is entitled to such income on or before the making of the application for a protective certificate, or within 6 years 6 months (DSA) or 7 years 6 months (PIA) thereafter. This means that, assuming the normal Revenue-approved pension age of 60 applies, where a person is aged 60 or over, the lump sum to which they would be entitled (normally 25% of the fund), and the pension income arising during the following 6 years 6 months (unsecured debt) or 7 years 6 months (secured/unsecured debt) is brought into the arrangement and becomes available to banks or other creditors.
Excluded and Excludable Debts
As originally drafted, the Bill treated debts due to Revenue as being excluded from an insolvency arrangement. These are now classified as “excludable”. This means that, unless the Revenue Commissioners object, Revenue debts may now be included in an insolvency arrangement. Other excludable debts are local government rates and related charges, management company service charges or Social Welfare debt.
Examples of debts which remain excluded are awards under Court Orders for maintenance or domestic support or personal injuries.
Reasonable expenses
The Seanad amended the Act to require the Insolvency service to provide guidance as to what constitutes a reasonable standard of living and reasonable living expenses for the duration of an insolvency arrangement.
While it will be some time before personal insolvency practitioners are appointed, persons who are considering availing of the new legislation should consult with an experienced financial advisor to discuss their options. Chartered accountants are already qualified to provide such advice, given their training in accountancy, commercial law and tax law. All of these skills, as well as significant mediation skills, will be required in order to compile acceptable proposals for agreement with all parties. For an initial consultation, please contact Declan Long at 045-433633 or email Declan@longaccounts.ie.