Personal Insolvency Bill 2012
This is a draft piece of legislation that aims to reform personal insolvency law and introduce a system
of non-judicial debt resolution processes. It proposes three specific new methods of resolving debts
or remedies that will be available to a debtor and also updates the bankruptcy court by amending the
current bankruptcy laws. The three suggested non-court remedies are: 
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Debt Relief Notice (DRN)
Debt Settlement Arrangement (DSA)
Personal Insolvency Arrangement (PIA)
The Bill has been drafted and read twice in Dáil Éireann and has now gone to Committee stage
before a final vote in the Dáil. It will then be referred to the Seanad and when the final version is
signed by the President it will become the Personal Insolvency Act. This is a wide ranging and
politically sensitive issue which is expected to be enacted before the end of 2012. However, given the
need to establish the Insolvency Service and introduce regulations for the regulation of Personal
Insolvency Practitioners etc, it is not envisaged that it would be operational before some time in 2013.
As the Bill is likely to change before it finally becomes an Act, it is too early to recommend to clients
specific changes to existing procedures in issuing credit and in collecting debt. However, it is clear
the Bill is wide ranging as currently drafted and will affect companies issuing credit to consumers. It is
highly recommended that all clients keep up to date with this topic and are ready to respond to the
new law when it comes into force. Intrum will provide regular updates by email and via our website
www.intrum.com/ie/
On balance, clients should welcome the opportunity to have non-judicial processes in place to resolve
issues of unpaid debt. However, to protect their own interests, clients should strive to avoid claims
against debtors being subject to a debt resolution process under the Bill in which, one way or another,
part or all of the debt will be forgiven or written off. On the other hand, the process places obligations
on the debtor also. It requires truthful declarations from the debtor and the option to enter into an
agreed payment plan after carrying out a review of the debtor’s income and expenditure.
Having regard to how the Bill is currently drafted, clients should consider the following options to
minimise the risk of imposed debt forgiveness or write off:
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Only issue credit to consumers who are in regular employment with minimum guaranteed
levels of income or to consumers who are home owners. These consumers are in general
excluded from the provisions of the Bill, but exclusions vary for each remedy.
Ensure unsecured credit is repayable in full within 30 days, or the agreed monthly instalment,
to allow sufficient time for collection of overdue amounts before they are 6 months old from
date of due payment.
Carry out prompt and regular “dunning letters”, calls, texts and emails.
Refer regularly and early to Intrum Justitia as soon as your in-house early collections process
is exhausted. At the latest, we recommend instructing us when payments are 90 days
overdue. At this stage, the invoice is 4 months old and Intrum has only 8 weeks remaining to
carry out its collection procedures before the debt is potentially subject to one of the remedies
under the Bill that a debtor can initiate at any time of their choosing thereafter.
At first sight the Bill brings into question for a small proportion of consumers how creditors are
to take legal action as the debtor may initiate a voluntary process which will require all legal
action to cease, even if a judgment has been obtained. However, given that this only applies
to debtors who have no likelihood of becoming solvent within 5 years, the impact should be
quite minimal for most creditors.
There are still some important unanswered questions regarding how the Bill is to be applied.
However, the rest of this paper summarises the remedies available to the debtor and the key facts as
laid out in the Bill for each remedy.
Debt Relief Notice (DRN)
This remedy is envisaged for those debtors with little or no disposable income or assets who have no
ability to enter into a settlement with creditors. In these cases, debtors with unsecured debts of up to
€20,000 can apply for protection from creditors and be found to be insolvent. The circumstances of
the debtor are supervised for 3 years and if there is a substantial change in the debtor’s
circumstances and 50% of the debt is discharged to creditors the debtor is deemed to have satisfied
his liability in full.
Key Facts:
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Can only apply for a DRN once in a lifetime.
In order to qualify for a DRN the debtor must;
o have unsecured debts less than €20,000,
o after allowing for reasonable living expenses, have a monthly disposable income of no
more than €60,
o not have assets worth more than €400 or a car worth more than €1,200,
o be domiciled in the State for a minimum of one year prior to making the application,
o must be insolvent, (unable to pay their debts as they fall due for payment),
o must have no likelihood of becoming solvent within 5 years,
o have not previously obtained a DNR, (only one per lifetime allowed),
o must not have accrued any more than 25% of the overall debt in the 6 months preceding
the application.
The process is debtor driven and also relies on the good faith of the debtor making disclosures to
an authorised person and the Insolvency Service.
The application is made by the debtor with the aid of an Approved Intermediary (such as MABS)
and considered by the Insolvency Service, who refer it to the relevant Court and obtain a DRN.
This is then copied and sent to all creditors.
The debtor is supervised by the Insolvency Service for 3 years upon obtaining the DNR.
The impact on the creditor is that all collections efforts must cease, including any litigation. All
efforts to execute a Judgment must be stopped. The creditor is not allowed to contact the debtor.
If the debtor’s finances improve, (€250 additional disposable net income per month) or if they
acquire a gift of over €500 they are required to notify the Insolvency Service and pay over half of it
to them. This is then distributed proportionally between creditors.
If 50% of the value of the debts is paid by this method, the debtor is deemed to have satisfied his
or her liability in full.
The creditor can apply to the Court if they are aggrieved by any act, omission, or decision of the
Insolvency Service.
Debt Settlement Arrangement (DSA)
A voluntary arrangement between the debtor and the creditor whereby the debtor agrees with the
consent of a minimum of 65% of his creditors a settlement amount payable over 5, (or sometimes 6)
years, for repayment and discharge of unsecured debt only. A debtor qualifying for the DSA would
not qualify for a DRN if the debtor has assets or income that would place him outside the criteria for a
DRN.
Key Facts:
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Can only have one DSA in a lifetime.
To qualify a debtor must:
o be domiciled in the state for at least one year prior to application,
o be insolvent, (that is to say unable to pay their debts as they fall due for payment)
o complete the Prescribed Financial Statement confirmed by a statutory declaration
statement,
o A Personal Insolvency Practitioner must issue a certificate stating they believe that
the debtor will not become solvent in the next 5 years,
o that debtor states he was unable to agree a repayment schedule with his creditors,
o debtor cannot be a bankrupt or have a DRN or a PIA.
A Personal Insolvency Practitioner notifies the Insolvency Service of the debtor’s intention to
apply for a DSA and then apply for a Protective Certificate.
When a Protective Certificate is issued, it means that a creditor cannot:
o initiate or continue existing legal proceedings,
o execute or enforce a judgment or recover goods,
o initiate bankruptcy proceedings,
o contact the debtor or continue collection activity.
The Protective Certificate is valid for 70 days from issue and can be extended for a further 40
days.
The creditor can appeal the issue of the Protective Certificate within 14 days and bear the
costs of doing so.
The Personal Insolvency Practitioner invites creditors to make submissions as to how the
debts might be dealt with under a DSA.
 The DSA must be approved by the majority of creditors - 65% based on value of the debt.
 It can be for a maximum of 5 (possibly extended to 6) years.
 If the debtor satisfies the agreement reached, he or she will be deemed to have paid his
or her liabilities in full
 The usual exclusions for the type of debt that can be contained in it apply such as family
maintenance payments, fines, taxes, local authority charges and service charges.
 The debtor is allowed to maintain a reasonable standard of living for him/herself and any
dependants. (The Insolvency Service will provide guidelines of what constitutes a
reasonable standard of living).
 The DSA will specify what happens in event of death or mental incapacity.
 The Personal Insolvency Practitioner is to review the arrangement each year.
 The Personal Insolvency Practitioner must give information to creditors advising of the
outcome for them of accepting the DSA.
 If the creditor does not reply to the proposal, they are deemed to have accepted it.
 The Personal Insolvency Practitioner calls a meeting of all creditors giving at least 14
days notice. Meetings can be attended electronically or by phone.
 The Personal Insolvency Practitioner makes the payments to creditors.
 There is an option to appeal to the Courts.
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The DSA will be registered on a register to be maintained by the Insolvency Service.
If the debtor’s circumstances change, he or she must notify the Personal Insolvency
Practitioner and must act in good faith at all times.
If the debtor falls into 6 months or more arrears, he or she will be deemed to have
terminated the agreement.
Personal Insolvency Arrangement (PIA)
This is a scheme that includes both secure and unsecured debts up to €3 million.
Key Facts:
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Only one PIA can be applied for in a lifetime. To qualify a debtor must:
o be domiciled in the state for at least one year prior to application and be insolvent.
o complete the Prescribed Financial Statement, confirmed by a statutory declaration
statement.
o a Personal Insolvency Practitioner must issue a certificate stating they believe that
the debtor will not become solvent in the next 5 years.
o the debtor states he was unable to agree a repayment schedule with his creditors.
o the debtor cannot be bankrupt or have a DRN or a DSA.
o the debtor must have co-operated with any appropriate scheme with his
bank/mortgage lender with regard to the mortgage debt in the six months prior to the
application for a PIA.
The Personal Insolvency Practitioner (PIP) will make the application to the Insolvency Service
on behalf of the debtor and will gather the prescribed financial statement and statutory
declaration from the debtor and it must not be a frivolous application or an attempt to frustrate
creditors.
When a protective certificate is issued it means that as a creditor you cannot –
o initiate or continue existing legal proceedings,
o execute or enforce a judgment or recover goods,
o initiate bankruptcy proceedings,
o contact the debtor or continue collection activity.
A creditor can apply to the Court to ask that the Protective Certificate not apply to them if it
would cause them irreparable loss and no other creditor would be unfairly prejudiced.
The creditor must be able to submit proof of debt or the claim will not be included in the
settlement payments.
The Personal Insolvency Arrangement will specify if the debt is secure or unsecured, that the
maximum term is 72 months, that it does not release the debtor from secured debts, the usual
exclusions (such as family maintenance payments, fines, taxes, local authority charges and
service charges) apply, it will specify the costs of obtaining it, there will be a provision for
death or mental incapacity, it will be reviewed every 12 months and what security is held by
the secured creditors.
The Personal Insolvency Practitioner can propose: a lump sum payment, payment
arrangement, transfer of assets, sale of assets, to pay interest and part capital, that lending
time be extended, deferred payments, interest to be fixed, arrears to be added to capital
amount, principal sum to be reduced.
If a secured asset is sold and the proceeds of sale do not cover the amount due, the
remainder will be then treated as an unsecured debt.
The PIP can include the debtor’s principal private residence in the arrangements.
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The debtor cannot dispose of an interest in the principal private residence without
independent legal advice, unless the PIP has advised the debtor to do so.
The value assigned to secured property is the market value and the creditor and Personal
Insolvency Practitioner bear the costs of obtaining this equally,
The Personal Insolvency Practitioner must call creditor meetings (as in the DRN and DSA
schemes).
The PIA must be approved by the majority of creditors - 65% based on value of the debt.
The Personal Insolvency Arrangement can be varied if debtor’s circumstances change.
The PIA can be terminated upon application to the Court for procedural reasons, inaccuracy,
eligibility not complied with, if the debtor gave a preference, if the debtor enters a transaction
at an under value or the debtor engineered circumstances so as to qualify for a PIA.
Arrears of six months will mean the arrangement is terminated.
Definitions
Secured Debt
A mortgage, judgment mortgage, charge, lien, pledge, collateral, assignment or undertaking (including
a solicitors undertaking)
Excluded Debt
A domestic support order, tax, the household charge, rates, HSE Nursing Homes Support Act
payments, management fees under the remit of Section 19 of the Multi Unit Development Act 2011,
court ordered damages from a Tort case and any fraud.
Insolvency Service of Ireland
This will be a new Government Agency to be staffed by Civil Servants. Its function will be to monitor
the operation of the arrangements and consider applications for Debt Relief Notices. It will process
applications for Protective Certificates and maintain a register. They will approve and authorise
persons to perform functions of an approved intermediary acting on behalf of the debtor.
Approved Intermediary
An Approved Intermediary is appointed by the Insolvency Service. They cannot charge the debtor.
They are not liable for damages for acting in good faith in their capacity as agent for the debtor. The
Minister may prescribe the criteria set for being able to be an Approved Intermediary. The Insolvency
Service can pay the Approved Intermediary. It is probable that this role will be filled by MABS.
Personal Insolvency Practitioner
A Personal Insolvency Practitioner can submit Statements of Means on behalf of the debtor, hold
meetings with the debtor, advise them of their options and act for them if appointed by the debtor.
They can prepare a formal financial statement with information the debtor provides and submit
applications for either a Personal Insolvency Arrangement or a Debt Settlement Arrangement. In
Committee hearings it was suggested that solicitors, accountants and potentially mortgage brokers
may offer themselves as Personal Insolvency Practitioners.