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Personal Insolvency Bill Enacted with Key Seanad Amendments
- 07 January 2013
With a very limited fanfare, the Personal Insolvency Bill 2012 finally slipped into legislation during the latter stages of December 2012. Despite 104 pages of amendments by Seanad Éireann, much of the Act remains as it was when published in July 2012.
The Seanad have however addressed three very important matters which were widely held to be problems / uncertainties regarding the new insolvency processes under the following headings:
1) Pensions
2) Excluded Debts
3) Reasonable Living Expenses
Pensions
Long held as being sacriscant and untouchable under both Irish and UK Personal Insolvency Legislation, recent events in both Irish and British Courts had most believing that pensions were now potentially fair game.
The Seanad's amendments give clarification to this in that in relation to Debt Settlement Arrangements and Personal Insolvency Arrangements, where a debtor has an interest in or an entitlement under a relevant pension scheme that interest / entitlement:
1) Must be disclosed in the Presribed Financial Statement
2) Shall not be treated as an asset of the debtor unless...
The unless caveat above relates to two matters being that should a party be entitled to a draw down / income from the pension either before, during or in the 6 months following the maximum period of any insolvency scheme, they are considered to be in receipt of the funds and secondly, to avoid parties attempting to unfairly keep assets in a pension, subject to a Court action, a claw back period of three years has been included to prevent excessive pension contributions. Similar provisions are provided for in a bankruptcy process.
Excluded Debts
Originally, this section included a number of potential liabilities including many state / local government related liabilities which were not capable of being written down. However the amended act has seen this section split into two headings being excluded debts and excludable debts. While excluded debts such as those arising from maintenance orders, crime or personal injury claims remain incapable of write down, excludable debts such as taxes, rates, local government service charges can now be included in the new personal insolvency schemes and potentially be written down if the Creditor consents or is deemed to have consented to the inclusion of the debt in a such a scheme.
In circumstances where the payment of taxes and rates were seen as a barrier to escaping bankruptcy and the inability to write same down under the new schemes rendered them considerably less effective, albeit that they still appear to retain preferential status under the New Schemes, these particular amendments by the Seanad must be welcomed.
Reasonable Living Expenses
The original drafts of the act were quiet on what would exactly be considered reasonable in this regard. The Seanad however have properly seen fit to put an end to this area of uncertainty by placing a requirement on the Insolvency Service of Ireland to prepare and issue guidelines as to what consitutes a reasonable standard of living and reasonable living expenses. The Insolvency Service have obviously to engage with the other relevant Government bodies in the preparation of these guidelines and the guidelines are to be as detailed as possible however to allow for changing circumstances, the Insolvency Service are to issue revised guidelines on at most an annual basis. This will be a sizeable task and will no doubt be subject to much scrutiny and comment once issued.
Conclusion
While now enacted, there remains much to be completed in terms of the set up and staffing of the new Insolvency Service and as a result, it is likely to be several months before we see the first entrants to one of the new processes however the amendments by the Seanad must be seen as a very important finishing touches to the act.
Source: Insolvency Journal - Personal Insolvency Bill Enacted with Key Seanad Amendments
