- Bill makes practical changes to ensure that borrowers have effective access to personal insolvency legislation, despite the COVID-19 pandemic
- Measures will help borrowers at risk of losing their homes
- Bill removes a barrier to borrowers applying for court review, if creditors refuse a personal insolvency proposal that includes their home mortgage arrears
- Bill removes obstacle for people on very low incomes, seeking to resolve debts via a Debt Relief Notice
The Minister of State for Law Reform, Youth Justice and Immigration, James Browne TD, has welcomed the passing by both the Dáil and Seanad of the Personal Insolvency (Amendment) Bill 2020. The Bill will be sent shortly to the President for his signature.
The Bill, initiated in September 2020 by Minister McEntee, makes a number of urgent changes to the Personal Insolvency Act 2012, to help people who are struggling to pay their debts to have more effective access to personal insolvency processes and solutions, in light of the COVID-19 pandemic.
Minister Browne said,
I welcome the passage of this valuable Bill by the Oireachtas, and I look forward to it being signed into law by the President. We are working to ensure that the Act can then come into operation as quickly as possible.
Perhaps the most important change made by the Bill relates to insolvent homeowners who are struggling to pay their home mortgage arrears. The Personal Insolvency (Amendment) Act 2015 introduced a key protection for these borrowers. It allowed them a right to seek review by a court, if their mortgage lender, or other creditors, refuse a reasonable proposal for a personal insolvency arrangement.
However, this protection currently only applies to home mortgage arrears dating from before 1 January 2015. So a person at risk of losing their home, whose financial difficulties first arose from the COVID-19 pandemic, would be unable to apply for the court review. The Bill removes the condition that the borrower’s home mortgage arrears must pre-date 1 January 2015, in light of these changed economic circumstances.
The Bill also adjusts the asset ceiling for an insolvent person applying for a Debt Relief Notice - the statutory debt restructure designed for people with debts not exceeding €35,000, and very little income or assets. The ceiling for assets (including savings) is raised from €400 to €1,500. This will remove an obstacle that could otherwise affect recipients of some social welfare payments that are paid as lump sums, such as Fuel Allowance or Carer’s Support Grant.
The Minister continued,
I’m glad to say that the Bill will also help people on very low incomes, who don’t own a property or have any significant assets, and are currently burdened with debts they have no prospect of being able to pay. The Bill removes a potential obstacle to people in this situation availing of a Debt Relief Notice, to help them return to solvency.
The Bill makes a number of other practical changes to ensure that personal insolvency processes work better for those affected by the pandemic:
- allowing a key advisory meeting between the insolvent person and their financial adviser to take place via remote communications technology, rather than face to face;
- allowing a short extra extension of some key procedural deadlines; and
- allowing the insolvent person to make a written Confirmation of Truth, which does not have to be formally sworn or witnessed, as an alternative to a statutory declaration (while retaining strict penalties for making any such statement that the person does not believe to be true.)
The Minister concluded,
Living with unsustainable debt is a very stressful situation for individuals and families, and that is why this Bill is so important. It can happen to anybody, and it can arise for reasons beyond the person’s individual control.
Entering the insolvency process is not an easy way out, as is sometimes suggested. It requires continued engagement from the insolvent person. But it provides a vital pathway for people to get back to solvency, and to re-engage with our economy.
This Bill will ensure more effective and more practical access to personal insolvency solutions for families who want to stay in their homes and who are willing to work their way through their debt problems. The Government continues to make free, expert financial, legal advice and help available through the Abhaile scheme, for those in home mortgage arrears who are at risk of losing their homes.
I would strongly encourage anyone who is worried about home mortgage arrears, or other problem debts, to contact MABS or the Insolvency Service for advice and help.
ENDS.../
Note to Editors:
These changes are a first delivery on the Programme for Government commitment to ‘Introduce the necessary reforms to our personal insolvency legislation and ensure that sufficient supports are in place for mortgage holders in repayment difficulties.’
A statutory review of the Personal Insolvency Acts is currently being finalised, and a further amending Bill is expected to be prepared, later this year, to address its recommendations. The Programme for Government also commits to continue to resource Abhaile, whose future delivery will be informed by the comprehensive review of Abhaile that is planned later this year.
The amendments made by the Bill take account of the particular health risks arising from the COVID-19 pandemic, and of the logistical and practical challenges arising from public health restrictions necessitated by the pandemic. However, the changes are not limited to the duration of the pandemic, as they are considered valuable beyond that period.
The text of the Bill is published on the Oireachtas website here: https://www.oireachtas.ie/en/bills/bill/2020/76 .
More detailed explanation of the Bill (the Explanatory Memorandum) is published here: https://data.oireachtas.ie/ie/oireachtas/bill/2020/76/eng/memo/b7620s-memo.pdf .
Information on personal insolvency is available from the Insolvency Service of Ireland here: https://backontrack.ie/about/.
Information on Abhaile is available from MABS here: https://www.mabs.ie/en/abhaile/ .
The Personal Insolvency (Amendment) Bill 2020 amends the Personal Insolvency Act 2012 (the ‘Principal Act’), and contains the following main provisions:
Section 2: increases the ceiling under the Principal Act for personal assets (including savings) for a debtor to be eligible to propose a Debt Relief Notice, from €400 to €1,500. (Basic household goods and other items, up to a certain value, are disregarded.) This increase addresses a potential problem for recipients of certain social welfare payments that are paid in advance lump sums annually or bi-annually - such as Fuel Allowance, or Carer’s Support Grant. Receipt of such lump sum payments into the person’s bank account can result in them temporarily seeming to exceed the €400 ceiling, when their financial situation is in fact suited to a Debt Relief Notice.
Sections 3 and 5 : will allow the mandatory advisory meeting on personal insolvency solutions, between the debtor and their authorised financial adviser (Approved Intermediary or Personal Insolvency Practitioner), to take place via remote communications technology (RCT), rather than face to face, subject to some protective conditions. This will often be safer and more convenient, both for the insolvent person and the adviser. The Insolvency Service of Ireland will have power to regulate the types of RCT by regulations, to ensure that advisory standards are maintained.
Section 6: corrects a reference in section 54 of the Principal Act to the maximum permitted duration of a Personal Insolvency Arrangement, which is inconsistent with the main provision in the Principal Act on its duration, at section 99, and risks giving rise to confusion on this key issue.
Sections 7 and 17: will allow a Personal Insolvency Practitioner (‘PIP’) to delegate certain statutory functions under the Principal Act, such as chairing creditors’ meetings, to another person employed by the PIP, or working with him/her in the same firm, subject to certain conditions. This will assist practitioners to manage increased workloads, and to comply with public health guidelines more easily in case of any COVID-19 infection. The delegating PIP will remain responsible for the performance of that function by the person to whom s/he has delegated it.
Sections 10 and 13: will allow an additional extension, not exceeding 40 days, of the ‘protective certificate’ (the court protection period for the debtor which allows the personal insolvency practitioner to put together a debt restructure package that creditors can agree) – where the court considers this to be just.
Section 14 makes three separate amendments to section 115A of the Principal Act, which introduced the right of a debtor to apply to court for review, if their creditor(s) refuse the debtor’s proposal for a personal insolvency arrangement that includes the debtor’s home mortgage arrears:
Section 14(a): extends the deadline for the debtor ’s Personal Insolvency Practitioner (‘PIP’) to apply to court for the review under section 115A, from 14 days to 28 days from the date of the creditor refusal. The current 14-day deadline is unextendable, and some flexibility is needed to respond to the circumstances of the pandemic.
Section 14(b): clarifies that where a debtor’s PIP applies for court review under section 115A within that 28-day period, the debtor’s protective certificate continues in force until the court has decided the review application (or any appeal).
Section 14(c): amends the condition in section 115A that in order to be eligible for a court review, the personal insolvency proposal rejected by the debtor’s creditor(s) must include arrears on the debtor’s home mortgage that first arose before 1 January 2015. The amendment removes the cut-off date of 1 January 2015, so that a borrower whose home mortgage arrears first arose after that date is also eligible to apply to court for review.
Sections 15 and 16: refer to the statutory declaration which a debtor must provide to the Insolvency Service of Ireland, to solemnly confirm the extent of their financial difficulties, as set out in a detailed accompanying document called the Prescribed Financial Statement. The amendments allow the debtor to make a written Confirmation of Truth (which does not need to be formally sworn or witnessed) as an alternative to the statutory declaration.
This is a modernising and cost-saving reform (similar to the provision introduced by the Civil Law (Miscellaneous Provisions) Act 2020 for a person to provide a Statement of Truth, in place of an affidavit or statutory declaration, when lodging documents in a court). It allows more flexibility to comply with public health restrictions, while retaining strict penalties for a debtor who makes statements that he or she does not honestly believe to be true.
Sections 4, 8, 9, 11, and 12 of the Bill make some consequential amendments.