The Minister for Justice and Equality, Frances Fitzgerald TD, has signed an order bringing into force on Friday 20 November the remaining provisions of the Personal Insolvency (Amendment) Act 2015, including the new Court review where a mortgage lender rejects the borrower’s personal insolvency proposal.
Under the new provisions, a borrower can apply for review by the Courts, if creditors such as the mortgage lender refuse the borrower’s proposal for a Personal Insolvency Arrangement to deal with unsustainable debts which include the mortgage on their home. The Court can examine the proposal refused by the creditors, subject to certain conditions, and if it considers the proposal fair and sustainable, using the tests set down in the legislation, will have power to impose the proposal on the creditors who voted against it.
Minister Fitzgerald said: ‘I am very pleased to commence the remaining provisions of the Personal Insolvency (Amendment) Act 2015. The Courts’ new power to review a Personal Insolvency proposal rejected by creditors is a very significant milestone in the development of Ireland’s insolvency regime. It’s an important reform to protect mortgage holders in distress, and is a key element of the Government’s Action Framework to strengthen support for those in mortgage arrears, which we announced on 13 May.’
‘From this Friday, for the first time, a borrower who is trying to engage with resolving their debts will not have reached the end of the road if creditors vote against their insolvency proposal. The new Court review introduces an independent oversight mechanism to ensure that the right balance is struck between the interests of mortgage lenders and other creditors, and the interests of borrowers who want to work their way out of debt sustainably with a view to keeping their homes. It will make sure that this balance is fair, and is seen to be fair. ’
The Minister added: “The Government would like to see a substantial increase in the overall number of Personal Insolvency Arrangements (PIAs) reached under the Personal Insolvency legislation, with the full cooperation of all lenders. These are legally protected debt settlement deals, which can include mortgage arrears on the borrower’s home. They are worked out to provide a fair and balanced solution both for the borrower and the lender, if the borrower is insolvent (unable to pay their debts as they fall due). To ensure that PIAs can operate as the legislation intended, there must be full and genuine engagement both by the lender and by the borrower. Securing increased and accelerated engagement with the personal insolvency legislation is an absolute priority for the Government.’
The Minister concluded: ‘Help is already available for anyone worried about mortgage arrears who is willing to work their way through their debt problems. I would strongly encourage anyone who wants information on personal insolvency solutions to contact the Insolvency Service of Ireland at http://backontrack.ie/ .’
Note to Editors
The Personal Insolvency (Amendment) Act was signed by the President on 28 July 2015 and amends the Personal Insolvency Act 2012. Many of the amending Act’s provisions were already commenced by Minister Fitzgerald, with effect from 29 September 2015. The remaining provisions, including the new Court review, needed changes to the relevant Circuit Court and High Court Rules before they could be commenced: those Rules changes were published earlier this week.
The Commencement Order Personal Insolvency (Amendment) Act 2015 (Commencement) (No.2) Order 2015.
signed by the Minister today, brings into effect on Friday 20 November all the remaining provisions of the 2015 Act (sections 4-5, 7-11, 13-15, and 17-22). These include section 21 of the amending Act, which provides for the new Court review.
Strengthening Framework to Support Mortgage Holders in Arrears
On 13th May 2015 the Government announced a number of new measures to support mortgage holders who are in arrears, including a reform of the 2012 Act to give Courts the power to review and where appropriate, to approve insolvency deals that have been rejected by banks. (See announcement at:
http://www.taoiseach.gov.ie/eng/News/Government_Press_Releases/Government_Strengthens_Framework_to_Support_Mortgage_Holders_in_Arrears.html . )
Main provisions of the new Court review
- Introduction of a Court review of proposed Personal Insolvency Arrangements (PIAs) that have been refused by creditors, where the debts include a mortgage on the debtor’s home which was in arrears on 1 January 2015, or which restructures such arrears.
- The Court review will have power to make an order imposing the PIA proposal rejected by creditors, if the Court considers that it offers a fair and equitable solution for both debtor and creditors.
- The Court will take into account a range of factors including the interests of creditors and debtor, the debtor’s financial situation, the return which would be available to creditors, and the likelihood of the debtor being able to comply with the terms of the proposed arrangement.
- The criteria for assessing the proposal reflect those used by a Court when assessing a proposal in a company examinership.
- Review cases will be heard by the specialist Circuit Court judges assigned to deal with personal insolvency cases.
- The amendments also ensure that a person in mortgage arrears on their home who has entered a mortgage restructure with their lender will be eligible to propose a PIA, if the restructure fails or proves unsustainable and the borrower is insolvent.
Under the original provisions of the 2012 Act, a PIA proposal is voted on by the creditors, and must be approved by the necessary majorities of secured and unsecured creditors. If the creditors reject the proposal, however, there is no existing provision for a review or appeal.
The new court review will change this situation.
The 2012 Act already contains a number of measures to guard against any unfair lack of cooperation by a borrower with their creditors, and to ensure a solid ‘floor’ of protection for the rights both of borrowers and of creditors.
Great care has been taken to ensure that the new Court Review mechanism is balanced, and that it takes fair account, to the greatest extent possible, of the rights of both lenders and borrowers.
Personal Insolvency Arrangements (PIAs)
Under the Personal Insolvency Act 2012, a person who is insolvent (unable to pay their debts as they fall due) may seek a Personal Insolvency Arrangement. This is a legally binding agreement with his or her creditors that will write off some of the debt, restructure any remaining debt, and return the person to solvency within a set period. A PIA is suitable where the debts include mortgage or other secured debts, but can also include unsecured debts. While the PIA proposal is being worked out and finalised, the debtor is protected by a court order (a Protective Certificate) against action by creditors seeking to enforce their debts.
The PIA proposal is worked out on behalf of the debtor by a Personal Insolvency Practitioner (PIP) authorised by the Insolvency Service, who takes account of rules laid down in the 2012 Act to ensure fairness both to the debtor and to the creditors. The proposal will provide that debts are repaid during the period of the PIA, to the extent that the debtor’s means reasonably permit. At the same time, the proposal must, where reasonably practicable, allow the debtor to keep their home, if it is reasonable to the accommodation needs of the debtor and dependents, and the costs of remaining there are not disproportionately high.
The Insolvency Service of Ireland (ISI)
The ISI is an independent statutory body, which was established under the 2012 Act by the Minister for Justice and Equality on 1 March 2013. More information on personal insolvency is available from the Insolvency Service at http://www.isi.gov.ie/ or http://backontrack.ie/ .
Help for borrowers at risk of home repossession
In repossession proceedings brought by a mortgage lender against the borrower’s home, the Circuit Court already has the power (under s. 2(2) of the Land and Conveyancing Law Reform Act 2013) to adjourn the proceedings to enable the borrower to explore applying for a Personal Insolvency Arrangement and to prepare a PIA proposal. (The adjournment is for up to 2 months, with further adjournment possible if the Court considers there is significant progress towards a PIA proposal.)
Under the Government Framework to Strengthen Support for those in Mortgage Arrears, MABS (Money Advice and Budgeting Service) (www.mabs.ie) and the Insolvency Service http://backontrack.ie/ are present from 1 October 2015 at all Circuit Courthouses across the country which are dealing with repossession applications, to provide independent information and assistance to householders trying to resolve their mortgage arrears.