Hundreds seeking insolvency hit by delay

Hundreds of people with debts of less than €20,000 faced delays in securing insolvency arrangements after legislation to assist them was found to be unworkable.

The Personal Insolvency Act 2012 contained flaws that made it almost impossible for the Money Advice and Budgeting Service (Mabs) to progress debt relief notices, designed to help people with small unsecured debts such as personal and credit card loans.

New legislation, the Companies (Miscellaneous Provisions) Act 2013, was signed into law by President Michael D Higgins on Christmas Eve.

Initially drafted to introduce cheaper examinership processes for companies in financial difficulty, it had to be amended to include a fix for the problems found in the 2012 Act.

The 2012 insolvency legislation introduced three new insolvency arrangements for different kinds of debt, including debt relief notices, seen as the lowest rung on the personal insolvency ladder.

While the Insolvency Service of Ireland, set up under the legislation, began accepting applications for all three arrangements in September this year, so far only 11 cases have reached the courts.

Only one case has received final court approval and there have yet to be any cases involving debt relief notices.

'Operational difficulties'
Approved intermediaries at Mabs who deal with debt relief notices have so far received more than 175 applications from debtors around the country. But they have yet to progress due to "operational difficulties" with the 2012 Act.

The Act included a restricted definition of “debt” that made it difficult to operate, as well as a clause saying if a quarter or more of debts were incurred up to six months before the application date, the debtor would not be eligible for the arrangement. Both restrictions have been removed.

The Department of Justice said both Mabs and the Insolvency Service of Ireland had indicated “a potentially significant operational difficulty” in precisely determining the age of certain debts.

The amendments would improve the operation of the debt relief notice process, the department said.

Noeline Blackwell, director general of Flac, the free legal advice centres, welcomed the amendments and said people who were "extremely poor" would have some relief from debt a year after the original legislation was signed into law.

She also said it proved the necessity of keeping an eye on legislation to ensure it did what it was designed to do.