Overview

The Personal Insolvency Act 2012 introduced 3 mechanisms for non-judical debt settlement;

• Debt Relief Notice (“DRN”)
• Debt Settlement Arrangement (“DSA”)
• Personal Insolvency Arrangement (“PIA”)

PIA and Secured Debts

Specifically, the PIA was introduced to address debt problems relating to secured assets, such as mortgages on family homes. In order for borrowers PIA (debt settlement proposal) to be successful, the 2012 Act noted that approval was required by

• 50% of secured creditors
• 50% of unsecured creditors
• 65% of overall creditors

This condition gave banks (i.e. secured lenders) an effective power of veto and many commentators point to the rule as the reason for the comparatively low level of take-up in PIA’s to date.

Amendment

The new act has been amended to give the Irish courts the ability to overturn a secured creditors' decision to reject a PIA under the previous 2012 Act, subject to application by a Personal Insolvency Practitioner (“PIP”). In order for the court to review the PIA,

• the debt needs to be secured on a family home, with arrears at 2015.01.01, or where an arrangement is in place with the secured creditor.
• the PIP must prove the majority of another class of creditors for the PIA /settlement arrangement.

It is widely, hoped the amendment will lead to a rise in the number of PIA (debt settlement arrangements) given the relatively low levels of take-up since their initial introduction.

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