What is a Debt Relief Notice?
A Debt Relief Notice is one of 3 new measures contained in The Personal Insolvency Bill 2012 which was passed into law in Ireland at the end of 2012 and which is intended to offer non-judicial debt settlement arrangements to debtors with personal debt problems. The other two new measures contained in the bill are Debt Settlement Arrangement and Personal Insolvency Arrangement. A debtor who plans to seek to avail of any of these measures should obtain independent legal and/or financial advice from an authorized organisation or a qualified professional such as a local Legal Advice Centre, the Money Advice and Budgeting Service, a solicitor, a qualified accountant, a licensed and authorised insolvency practitioner, a debt advice provider, a reputable financial adviser or a debt advice centre. It is expected that each of these reliefs will be available to insolvent persons during the course of this year (2013).
Who will be able to do a Debt Relief Notice?
A Debt Relief Notice is limited to insolvent persons whose total unsecured debts are less than €20,000 and who have limited assets and low income and who have no likelihood of becoming solvent within three years after availing of this relief. Assets cannot exceed €400 apart from a vehicle of up to €2,000 in value and certain household items and business-related books, tools and equipment of up to €6,000 in value and one item of personal jewellery valued at not more than €750. Monthly net disposable income must not exceed €60. A Debt Relief Notice application cannot be made if the debtor incurs 25% or more of the relevant debts in the six months period preceding the date of application for a Debt Relief Notice and the debtor must be ordinarily resident in Ireland. He or she must not, in the two years period preceding the application for a Debt Relief Notice, have entered into a transaction at an undervalue which has contributed to his or her financial difficulties nor given a preference to a person that has substantially reduced the amount available to discharge his or her other debts. There are some other restrictions relating to eligibility for a Debt Relief Notice which mainly relate to whether the debtor is availing of or availed of certain other insolvency processes within certain time parameters.
How does a Debt Relief Notice affect creditors?
The consent of creditors is not required for a Debt Relief Notice to be approved. Provided the debtor is insolvent i.e. unable to pay his or her debts as they fall due and provided he or she complies with the eligibility requirements in regard to debts, assets and income as outlined above, then creditors cannot prevent a debtor from applying for a Debt Relief Notice and having it approved. If any creditor wishes to object to the granting of a Debt Relief Notice, they do of course have recourse to the courts where they may lodge their objection and seek satisfaction.
If the debtor’s financial circumstances do not change during the term of the Debt Relief Notice, then he or she will have nothing whatsoever to pay to creditors in respect of the specified qualifying debts. Should the debtor’s financial circumstances change for the better then they may be obliged to make payments to The Insolvency Service during the term of the Debt Relief Notice.
During the supervision period of the Debt Relief Notice, normally three years, creditors may not initiate any legal proceedings in relation to a specified qualifying debt. They may not take any step to prosecute any such legal proceedings already initiated. They may not take any step to secure or recover payment of a specified qualifying debt. They may not execute or enforce a judgment or order of a court or tribunal against the debtor in respect of a specified qualifying debt. They may not take any step to recover goods in possession or custody of the debtor, whether or not title to the goods is vested in the specified creditor. They may not contact the debtor regarding payment of a specified qualifying debt, other than at the request of the debtor.
In relation to an agreement with the debtor, other than a security agreement, creditors may not terminate or amend that agreement or claim an accelerated payment under that agreement. They may not, in respect of a specified qualifying debt, present, apply for or proceed with a bankruptcy petition or a summons under section 8 of the Bankruptcy Act 1988. No other proceedings, execution or other legal process in respect of a specified qualifying debt may be commenced or continued against the debtor or his or her property, except with the leave of the appropriate court. This does not prohibit the commencement or continuation of any criminal proceedings against the debtor.
Creditors may however take certain actions as respects another person who has guaranteed a debt of the specified debtor concerned and this relates to any other person who is jointly liable with the specified debtor for the debt, unless a Debt Relief Notice is also in effect in relation to that other person or a Protective Certificate has been issued and is in effect in relation to that other person.
The rights of secured creditors to enforce or otherwise deal with their security are not affected by the constraints above which apply only to the specified unsecured creditors.
04/03/2013 written by Paddy Byrne