‘Avalanche’ of bankruptcies expected under new law
Department of Justice awaiting new court rules before commencement can go ahead
An avalanche of bankruptcy cases are expected next month following the commencement of legislation that shortens the bankruptcy terms from 12 to three years, insolvency expert group New Beginning has said.
The change in the bankruptcy system was introduced as part of the Personal Insolvency Act 2012, but while most of the act has already been commenced and three new mechanisms to deal with debt have been introduced, the element dealing with bankruptcy was not.
A spokesman for the Department of Justice said this morning the section dealing with bankruptcy would be commenced in the next couple of weeks. The department was waiting on new rules of court to be drafted before commencement, he said.
Barrister Vincent P Martin of New Beginning said they have “hundreds” of cases waiting for the commencement of the legislation.
Many of the organisation’s clients will try the new mechanisms including debt settlement arrangements or personal insolvency arrangements first, he said, but if creditors decide to veto those options, “the debtor will be advised to go the bankruptcy route”.
“In that instance, the creditor will get less and probably nothing, so it will be in the banks’ interests to agree to an arrangement, though it might well require a number of bankruptcies before the banks appreciate what they are facing,” he said.
Yesterday, what is believed to be the first ever debt settlement arrangement protection certificate was issued at the Circuit Court in Monaghan.
The certificate issued to a Donegal man who will now have the protection of the courts for 70 days giving him time to come to a settlement with his creditors. He was advised by advocacy group New Beginning. It is understood the debt involved was more than €100,000.
A debt settlement arrangement is one of the three new debt resolution mechanisms introduced under the Personal Insolvency Act 2012. It is designed for individuals who have no prospect of paying off their debts in the next five years.
Unlike a personal insolvency arrangement, a debt settlement arrangement applies to unsecured debt only and has no maximum figure. The arrangement must be agreed by the debtor and then approved by 65 per cent of his creditors. It can be applied to debts including the balance of a mortgage owed to a lender once the property itself has been dealt with, such as through sale or repossession.
If creditors agree to the arrangement, monies are paid out to them over a period of five years after which the debtor is discharged from his debts.
Mr Martin said the case represented a milestone and a chance for ordinary people to rid themselves of the shackles of debt. It was the first such certificate in the country, he said, and no creditor can now move against the man while the certificate is in place.
“It is the first step in the recovery for many of the ordinary people of Ireland who can begin to again embrace a fresh start,” he said.
“Many of Ireland’s former wealthiest have long since secured a financial resolution, now it is the turn, long overdue, of the ordinary people of Ireland to reclaim their futures.”