Press release
Ministers Humphreys and Browne announce commencement of the main provisions of the Personal Insolvency (Amendment) Act 2021
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The Minister for Justice, Heather Humphreys TD, has signed an Order commencing all the main provisions of the Personal Insolvency (Amendment) Act 2021 with effect from 25 June. The Act was recently brought through the Houses of the Oireachtas by the Minister of State for Law Reform, Youth Justice and Immigration, James Browne TD.
The Act makes a number of urgent changes to the Personal Insolvency Act 2012, to help people who are struggling to pay their debts to have more effective access to personal insolvency processes and solutions, in light of the COVID-19 pandemic. However, the changes are not limited to the duration of the pandemic, as they are considered valuable beyond that period.
Minister Humphreys said:
"I am pleased to be able to commence all the main provisions of the Personal Insolvency (Amendment) Act 2021 with effect from 25 June.
"Perhaps the most important provision being commenced relates to insolvent homeowners who are struggling to pay their home mortgage arrears. The Personal Insolvency (Amendment) Act 2015 introduced a key protection for these borrowers. It allowed them a right to seek review by a court, if their mortgage lender, or other creditors, refuse a reasonable proposal for a personal insolvency arrangement.
"However, this protection currently only applies to home mortgage arrears dating from before 1 January 2015. So a person at risk of losing their home, whose financial difficulties first arose from the COVID-19 pandemic, would be unable to apply for the court review. The Act removes the condition that the borrower’s home mortgage arrears must pre-date 1 January 2015, in light of these changed economic circumstances."
Welcoming the signing of the Commencement Order, Minister Browne said:
"Living with unsustainable debt is a very stressful situation for individuals and families, and that is why this Act is so important. It can happen to anybody, and it can arise for reasons beyond the person’s individual control.
"Entering the insolvency process is not an easy way out, as is sometimes suggested. It requires continued engagement from the insolvent person. But it provides a vital pathway for people to get back to solvency, and to re-engage with our economy.
"This Act will ensure more effective and more practical access to personal insolvency solutions for families who want to stay in their homes and who are willing to work their way through their debt problems. The government continues to make free, expert financial, legal advice and help available through the Abhaile scheme, for those in home mortgage arrears who are at risk of losing their homes.
"I strongly encourage anyone who is worried about home mortgage arrears, or other problem debts, to contact MABS or the Insolvency Service of Ireland for advice and help."
Another important provision being commenced is section 2, which adjusts the asset ceiling for an insolvent person applying for a Debt Relief Notice - the statutory debt restructure designed for people with debts not exceeding €35,000, and very little income or assets. The ceiling for assets (including savings) is raised from €400 to €1,500. This will remove an obstacle that could otherwise affect recipients of some social welfare payments that are paid as lump sums, such as Fuel Allowance or Carer’s Support Grant.
Minister Humphreys continued:
"I’m glad to say that the provisions of the Act being commenced will also help people on very low incomes, who don’t own a property or have any significant assets, and are currently burdened with debts they have no prospect of being able to pay. The Act removes a potential obstacle to people in this situation availing of a Debt Relief Notice, to help them return to solvency. This provision is also being commenced with effect from 25 June."
The provisions being commenced also make a number of other practical changes to ensure that personal insolvency processes work better, such as:
Minister Humphreys hopes to be in a position to commence the remaining provisions of the Act, which provide for a Confirmation of Truth as an alternative to a statutory declaration, as soon as possible.
The Personal Insolvency (Amendment) Act 2021 completed its passage through the Houses of the Oireachtas on 19 May 2021, and was signed into law by the President on 26 May.
These changes are a first delivery on the Programme for Government commitment to ‘Introduce the necessary reforms to our personal insolvency legislation and ensure that sufficient supports are in place for mortgage holders in repayment difficulties.’
A statutory review of the Personal Insolvency Acts is currently being finalised, and a further amending Bill is expected to be prepared, later this year, to address its recommendations. The Programme for Government also commits to continue to resource Abhaile, whose future delivery will be informed by the comprehensive review of Abhaile that is planned later this year.
The Personal Insolvency (Amendment) Act 2021 amends the Personal Insolvency Act 2012 (the ‘Principal Act’). The following provisions of the Act are being commenced with effect from 25 June: sections 1, 2, 3, 5, 6, 7, 10, 13, 14, 17 and 18.
Section 2: increases the ceiling under the Principal Act for personal assets (including savings) for a debtor to be eligible to propose a Debt Relief Notice, from €400 to €1,500. (Basic household goods and other items, up to a certain value, are disregarded.) This increase addresses a potential problem for recipients of certain social welfare payments that are paid in advance lump sums annually or bi-annually - such as Fuel Allowance, or Carer’s Support Grant. Payment of such lump sums into the person’s bank account can result in them temporarily seeming to exceed the €400 ceiling, when their financial situation is in fact suited to a Debt Relief Notice.
Sections 3 and 5: allow the mandatory advisory meeting on personal insolvency solutions, between the debtor and their authorised financial adviser (Approved Intermediary or Personal Insolvency Practitioner), to take place via remote communications technology (RCT), rather than face to face, subject to some protective conditions. The Insolvency Service of Ireland has power to regulate the types of RCT by regulations, to ensure that advisory standards are maintained.
Section 6: corrects a reference in section 54 of the Principal Act to the maximum permitted duration of a Personal Insolvency Arrangement, which is inconsistent with the main provision in the Principal Act on its duration, at section 99, and risks giving rise to confusion on this key issue.
Sections 7 and 17: allow a Personal Insolvency Practitioner (‘PIP’) to delegate certain statutory functions under the Principal Act, such as chairing creditors’ meetings, to another person employed by the PIP, or working with him/her in the same firm, subject to certain conditions. The delegating PIP will remain responsible for the performance of that function by the person to whom s/he has delegated it.
Sections 10 and 13: allow a new power for the court to extend, for up to 40 days, an insolvent debtor’s ‘protective certificate’ (a court order, protecting the debtor against creditor enforcement for a limited period while their personal insolvency practitioner puts together a debt restructure package that creditors can agree) –if the Court is satisfied that this would be just due to exceptional circumstances, or to other factors outside the control of the debtor or their personal insolvency practitioner. The amendment also clarifies the two existing situations where a protective certificate can be extended.
Section 14 makes three separate amendments to section 115A of the Principal Act, which introduced the right of a debtor to apply to court for review, if their creditor(s) refuse the debtor’s proposal for a personal insolvency arrangement that includes the debtor’s home mortgage arrears:
Section 14(a): extends the deadline for the debtor’s Personal Insolvency Practitioner (‘PIP’) to apply to court for the review under section 115A, from 14 days to 28 days from the date of the creditor refusal. The current 14-day deadline is unextendable.
Section 14(b): clarifies that where a debtor’s PIP applies for court review under section 115A within that 28-day period, the debtor’s protective certificate continues in force until the court has decided the review application (or any appeal).
Section 14(c): amends the condition in section 115A that in order to be eligible for a court review, the personal insolvency proposal rejected by the debtor’s creditor(s) must include arrears on the debtor’s home mortgage that first arose before 1 January 2015. The amendment removes the cut-off date of 1 January 2015, so that a borrower whose home mortgage arrears first arose after that date is also eligible to apply to court for review.
The other provisions being commenced are technical in nature: section 1 (Definition) and section 18 (Short title, collective citation and commencement).
The following provisions are expected to be commenced at a later date, after the necessary rules and forms have been put in place:
Sections 15 and 16: refer to the statutory declaration which an insolvent debtor must provide to the Insolvency Service of Ireland, to solemnly confirm the extent of their financial difficulties, as set out in a detailed accompanying document called the Prescribed Financial Statement. The amendments allow the debtor to make a written Confirmation of Truth (which does not need to be formally sworn or witnessed) as an alternative to the statutory declaration, while retaining penalties for a person making statements that he or she does not honestly believe to be true.
This is a modernising and cost-saving reform (similar to the provision introduced by the Civil Law (Miscellaneous Provisions) Act 2020 for a person to provide a Statement of Truth, in place of an affidavit or statutory declaration, when lodging documents in a court).
Sections 4, 8, 9, 11, and 12: make some consequential amendments, relating to the Confirmation of Truth.