Real Progress On Updating Bankruptcy laws

I was delighted to see the Heads of the Personal Insolvency Bill published yesterday by Ministers Alan Shatter and Michael Noonan. The existing laws on bankruptcy are antiquated and unhelpful when it comes to allowing people to get out from under the burden of debt and get on with their lives.

This was a commitment in the programme for Government, it’s a requirement under the bailout and it’s hoped it can be published in its legislative form by the end of April. In the meantime, it will go to the Justice Committee for their observations and consultation.

The Bill will provide for a new framework for settlement of debt and for personal insolvency. The proposed reform will consist of following main elements:

• The bankruptcy term will be reduced from 12 years to 3 years (or potential discharge after 5 years on application to the Court and subject to conditions).
• Debt Settlement Arrangement - a new non-judicial debt settlement process for unsecured debt only amounting to over €20,000.
• Personal Insolvency Arrangement - a non-judicial debt settlement process for both secured and unsecured debt amounting to over €20,000.
• Debt Relief Certificates - a debt relief system for low level indebtedness where the debtor has effectively no income and no assets and has unsecured debts amounting to up to €20,000.

An Insolvency Service will be set up to operate the new arrangements, and personal insolvency trustees will be appointed to act on behalf of debtors – essentially they are expected to liaise with banks on behalf of those in debt.

The system will allow people to stay in the family home while sorting out their debts and the emphasis is that you pay to your best ability. The provisions of the Bill have been broadly welcomed by support groups and others including the Free Legal Advice Centres (FLAC).

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Tony Mulcahy

Tony Mulcahy

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