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Minister McEntee to reform personal insolvency legislation to help borrowers hit by COVID-19
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- new Bill will remove obstacles in accessing the protection of the Personal Insolvency Acts for those with incomes severely hit due to the pandemic
- Minister’s measures will help borrowers at risk of losing their homes
The Minister for Justice, Helen McEntee TD, has obtained Government approval for priority drafting of the Personal Insolvency (Amendment) (No. 1) Bill.
This Bill will reform personal insolvency legislation to increase supports for borrowers whose income has been severely hit by the pandemic.
The Minister said:
"This short but urgent Bill tackles a number of issues in existing legislation. In the context of the current pandemic, these problems risk denying homeowners in difficulty the protection afforded by the Personal Insolvency Acts if they are struggling to pay what they owe.
"The Personal Insolvency Amendment Act 2015 introduced a key protection for insolvent homeowners who were struggling to pay their mortgage arrears.
"It allowed them the right to seek review by a court if their mortgage lender or other creditors refuse a reasonable proposal for a personal insolvency arrangement.
"However, that protection currently only applies to home mortgage arrears dating from before January 1, 2015. My new Bill will remove the condition that mortgage arrears must pre-date January 1, 2015."
The Minister added:
"Post-COVID, that condition would mean that a person who now finds themselves insolvent and in home mortgage arrears, arising from an unforeseeable loss of income, would be shut out from accessing this vital court protection. We want to avoid such a scenario.
"This is the first delivery on our Programme for Government commitment to introduce necessary reforms to our personal insolvency legislation.
"A second, wider Personal Insolvency Bill is being finalised. This will implement further important changes arising from the statutory review of the Personal Insolvency Acts, including making the process more streamlined and more effective."
The Minister said the Bill is a priority for the autumn session under the Government Legislative Programme. She is hopeful that drafting can be completed quickly and that the Bill could receive cross-party Oireachtas support for its rapid progression, once the final text is approved by Government.
The Bill also removes an obstacle for an insolvent person with very little income or assets to resolving their debts under the Personal Insolvency Acts by means of a Debt Relief Notice.
The General Scheme of the Bill can be read here:
General Scheme of Personal Insolvency (Amendment) [No. 1] Bill 2020
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The Bill will remove the gateway condition that mortgage arrears must pre-date 1 January 2015.
It also makes a range of procedural changes to ensure that personal insolvency processes work better for debtors affected by the pandemic, for example allowing for required advisory meetings between a debtor and their financial adviser to take place remotely, rather than face to face, and allowing short extra extension of some key procedural deadlines.
It also adjusts the asset ceiling for an insolvent person applying for a Debt Relief Notice - the debt restructure designed for people with very little income or assets - to remove an obstacle for recipients of lump sum payments under some social protection allowances such as Fuel Allowance or Carer’s Support Grant.
A further Bill, the Personal Insolvency (Amendment) (No. 2) Bill, is also in preparation. That is a larger and more comprehensive Bill, which will address the full range of changes arising from the statutory review of the Personal Insolvency Acts by the Department of Justice, which is nearing completion.
The Personal Insolvency (Amendment) (No. 1) Bill 2020 contains the following provisions:
- Head 1: increases the personal asset ceiling for a debtor to be eligible to propose a Debt Relief Notice, from €400 to €1,500. (Basic household goods up to a certain value are exempted.)
- Heads 2 and 3: will allow the mandatory advisory meeting on personal insolvency solutions, between the debtor and their financial adviser (MABS or personal insolvency practitioner), to take place via remote communications technology (RCT), rather than face to face, to facilitate safety for all concerned in view of pandemic-related public health restrictions. The Insolvency Service will have power to regulate the types of RCT by regulations, to ensure that advisory standards are maintained.
- Head 4: corrects a reference in one section of the Personal Insolvency Acts to the maximum permitted duration of a Personal Insolvency Arrangement, which is inconsistent and risks giving rise to confusion on this key issue.
- Head 5: will allow a personal insolvency practitioner to delegate certain statutory functions under the Personal Insolvency Acts, such as chairing creditors’ meetings, to an employee working under their direction and control. The practitioner will remain responsible for the actions of the employee. This will assist practitioners to manage increased workloads, and to comply with public health guidelines more easily in case of any infection.
- Heads 6 and 7: allow an additional extension of the ‘protective certificate’ (the court protection period for the debtor which allows the personal insolvency practitioner to put together a debt restructure package that creditors can agree) – in exceptional circumstances arising from COVID.
- Head 8: proposes to introduce a possibility of extension to the deadline for lodging an application for court review under section 115A, at the court’s discretion and in exceptional circumstances only. The deadline is currently unextendable and some flexibility is needed to respond to the circumstances of the pandemic.
- Head 9: removes the limitation in the s. 115A court review, to insolvent borrowers with home mortgages which were already in arrears (or unsuccessfully restructured) before 1 January 2015.
- Head 10: allows for the making a Statement of Truth (which does not need to be formally sworn or witnessed) as an alternative to a statutory declaration or affidavit. Again this allows more flexibility to comply with public health restrictions while retaining penalties for a debtor making statements which he or she does not honestly believe to be true.