The Personal Insolvency Act 2012 already provides for the debtor to appoint an independent person to act as their personal insolvency practitioner (PIP) or approved intermediary (AI), and to negotiate a debt resolution arrangement with creditors on their behalf (a Debt Relief Notice, Debt Settlement Arrangement, or Personal Insolvency Arrangement.) The Act also sets out the duties of PIPs and AIs to debtors, creditors and the Courts. PIPs and AIs are authorised and regulated under the Act by the Insolvency Service of Ireland. All debt resolution arrangements under the Act first have to be agreed by the debtor.
As regards creditor consent, the Act provides for 3 types of arrangement. The first, a Debt Relief Notice, does not require creditor approval (other than for adding an "excludable debt"). This type of insolvency resolution arrangement is suitable for an insolvent debtor with very limited disposable income and assets, whose qualifying debts do not exceed 20,000 euro. The second type, a Debt Settlement Arrangement, has to be approved by creditors representing at least 65% of the debts. The third type, a Personal Insolvency Arrangement, has to be approved by creditors representing at least 65% of the overall debts, at least 50% of secured debt and at least 50% of unsecured debt.
Similar creditor approval requirements apply in comparable jurisdictions. For example, in England, Wales and Northern Ireland, an individual voluntary insolvency arrangement has to be approved by creditors representing at least 75% of the overall debts. I believe that the creditor voting rules provided in the Personal Insolvency Act follow a common-sense approach, which strikes a fair balance between debtor and creditors, while taking account of constitutional constraints.
The Personal Insolvency legislation also gives the debtor an alternative option, as he or she may seek bankruptcy if creditors do not agree to a responsible proposal for an insolvency arrangement proposed on behalf of the debtor. We have just reduced the term of automatic discharge from bankruptcy from 12 years to 3 years. This greatly strengthens a debtor's hand in their dealings with the banks. If creditors refuse to engage fully and fairly with a debtor's proposals, the debtor has the option of filing for bankruptcy. If the bankruptcy petition succeeds, any property of the debtor is transferred to the Official Assignee in Bankruptcy, and the net proceeds are paid to the creditors: when the bankruptcy is discharged (normally after 3 years) all remaining debt is written off. This legislation will lead financial institutions to take a more realistic view of how to address issues of unsustainable debt, where substantial sums are owed and individuals are simply unable to pay them.