The Personal Insolvency Act 2012 places restrictions on certain transactions in so far as it precludes debtors who have engaged in these transactions during certain periods from availing of relief from their insolvency under the three new measures introduced in the Act.
The three new measures are Debt Relief Notice or DRN, Debt Settlement Arrangement or DSA and Personal Insolvency Arrangement or PIA. See our fact sheets below for descriptions of each of these three new measures in detail.
The transactions which are restricted under the new law are a Transaction at an Undervalue or TAU and a Preferential Transaction or PT.
A debtor enters into a TAU with another person if he or she:
- makes a gift to, or otherwise enters into a transaction with, that other person on terms that provide for the debtor to receive no consideration, or
- enters into a transaction with that other person, the value of which, in money or money’s worth, is significantly greater than the value, in money or money’s worth, of the consideration provided by that other person.
A debtor enters into a PT with another person if:
- the other person is a creditor of the debtor to whom a debt (other than an excluded debt or an excludable debt) is owed, or is a surety or guarantor for any such debt, and
- the debtor does any thing (including the granting of security), or suffers any thing to be done, which has the effect of putting that other person into a position which, in the event that the insolvency arrangement concerned is issued or comes into effect, as the case may be, would be better than the position in which that other person would have been if that thing had not been done or suffered to be done.
A debtor will not be eligible for the issue of a DRN if he or she, on the application date, has during the period of two years ending on the application date:
- entered into a TAU with a person, that has materially contributed to the debtor’s inability to pay his or her debts (other than any debts due to the person with whom the debtor entered the TAU) or
- given a preference to a person that has had the effect of substantially reducing the amount available to the debtor for the payment of his or her debts (other than a debt due to the person who received the preference).
A creditor may challenge the coming into effect of a DSA or a PIA:
- where the debtor had entered into a TAU with a person within the preceding three years that has materially contributed to the debtor’s inability to pay his or her debts (other than any debts due to the person with whom the debtor entered the TAU) or
- where the debtor had given a preference to a person within the preceding three years that had the effect of substantially reducing the amount available to the debtor for the payment of his or her debts (other than a debt due to the person who received the preference).
Written by Paddy Byrne
19 / 03 / 2013