A Debt Relief Notice is one of three new measures contained in The Personal Insolvency Bill 2012 which was published by the Irish Government in June 2012 and which is currently making its way through the torturously slow process of the Irish legislative system. It is expected to be passed into law in December 2012 or January 2013 and to be up and running within a further few months.
This measure is aimed at insolvent individuals whose unsecured debts in total amount to no more than €20,000. The gross value of their assets must not exceed €400 other than a car or other necessary vehicle which must not exceed €1,200 in value (and may be a higher undefined value for people with a physical disability). Personal belongings such as household equipment (bedding, clothes, furniture), tools and books and other items (used by the debtor in their job or business), are excluded from the calculations of asset values. Crucially it appears that payments from pension funds are to be treated as income rather than as assets.
The monthly disposable income of the debtor may not exceed €60 i.e. that is the maximum amount of surplus income they have left over after allowing for a reasonable level of personal living expenses for themselves and any dependants they may have. To qualify for a Debt Relief Notice, the insolvent debtor must be normally resident in Ireland or have lived and had a place of business in Ireland for one year.
It is still unclear if a debtor can obtain a Debt Relief Notice if they own a house in which there is no equity or where there is negative equity. Presumably the final version of the bill which is enacted will clarify this matter. In the UK owning a house regardless of whether there is equity in it or not precludes insolvent debtors from obtaining a Debt Relief Order, the UK measure on which the proposed Irish Debt Relief Notice appears to be largely based. Debtors will not be allowed a Debt Relief Notice if 25% or more of their debts were incurred within six months of their applying for a Debt Relief Notice. Also to be taken into consideration is the prospect of the debtor becoming solvent and there must be no likelihood of that occurring within five years, otherwise the Debt Relief Notice will not be granted.
The proposed legislation also covers the establishment of a body to be known as The Insolvency Service which will oversee the Debt Relief Notice system as well as the other insolvency measures being introduced in the bill. The Insolvency Service will create and maintain a Personal Insolvency Register to record the details of debtors who are issued with a Debt Relief Notice or are subject to one of the other insolvency measures being introduced in the bill. Applications for Debt Relief Notices will have to be made through what are being described as ‘approved intermediaries’ to The Insolvency Service, which decides whether to issue a Debt Relief Notice or not. The approved intermediary is under a duty to explain certain aspects of the procedure to the debtor. It is unclear at this stage what criteria will have to be met for a person to qualify as an approved intermediary. The fee for the service is expected to be €90 which is payable upfront and if a Debt Relief Notice is issued to the debtor, there will be nothing more to pay.
Once a Debt Relief Notice is issued, the debtor is protected from legal proceedings being taken against them in relation to their debts for a period of three years, the protection period. This applies to legal proceedings which had already commenced prior to the Debt Relief Notice being issued. If the debtor repays at least 50% of the value of the debts to The Insolvency Service, then their name may be removed from the Register of Debt Relief Notices. If the debtor is still unable to repay the debts at the end of the protection period, the debts are written off.
The allowable unsecured debts in a Debt Relief Notice include overdrafts, unsecured loans, credit card and store card debts, utilities, rent, phone, benefit overpayments, social fund loans and guarantees. The original draft legislation was unclear in regard to the treatment of debts incurred under a hire purchase agreement or a conditional sale agreement. Presumably the final bill will clarify this matter. There are certain debts which are excluded and which must be paid by the debtor in full, outside of the Debt Relief Notice. These include court imposed fines, child support payments, confiscation orders made by a court, spousal payments and periodic payment orders.
The debtor must not have applied for a Debt Relief Notice in the previous six years and no debtor will be allowed to obtain a Debt Relief Notice more than twice in a lifetime. There are restrictions as well for debtors who are already involved at a variety of stages in other insolvency processes. A key requirement in applying for a Debt Relief Certificate is the provision of a Standard Financial Statement, a list of debts and their amounts, the security held in respect of any of those debts, the financial circumstances of the debtor including his or her income and assets.
The bill also seeks to ensure that no debtor applying for a Debt Relief Notice has entered into any transactions at undervalue or carried out any preferential transactions in the two years prior to the granting of the Debt Relief Notice. Given the long legislative process of the Dail, it is to be hoped that the implementation of The Personal Insolvency Bill 2012 will proceed apace next year and that sufficient resources are provided to make it a workable process.
Written by Paddy Byrne 14/12/2012