New Irish Personal Insolvency Framework
7th August 2013
By Andrew Graveson
You may have read in the press that many Irish debtors have travelled to the UK to become bankrupt or to enter into other formal debt arrangements (such as protected trust deeds). Indeed our advice team has been contacted, on several occasions, by residents of Ireland that have wanted to understand how they might deal with their debts if they were to move to Scotland.
“Bankruptcy tourism” (as it has become known) has developed into its own small industry. Specialist firms have offered their services in Ireland to assist people in utilising the UK’s bankruptcy laws. Why have people gone to such great effort (and often expense) to use the UK’s personal insolvency regimes rather than those that exist in Ireland?
Historically the bankruptcy regime in Ireland has been especially severe. For example, if you had become bankrupt there your discharge might follow twelve years later. In Scotland discharge from the equivalent sequestration process has been automatic after twelve months. What if you didn’t want to become bankrupt in Ireland? Has there been a less severe alternative in the mould of Scottish trust deeds? The answer is no. To get unaffordable debts written off in Ireland the sole option was bankruptcy.
It would appear that the days of Irish “bankruptcy tourism” may be drawing to a close. Ireland has introduced a new set of personal insolvency arrangements that will be available to its residents. It’s expected that the new Insolvency Service of Ireland will start accepting applications later this month.
Our team has been involved in producing a new website that will help to explain the new options of personal insolvency for Irish residents. This website provides detailed information about the new debt solutions that are being introduced. By way of a brief summary:
Debt Relief Notices. This will be a debt solution that’s available to persons with very limited disposable income and few assets that could be sold to repay their debts. The closest equivalent in Scotland is LILA (low income low asset) sequestration (bankruptcy).
Debt Settlement Arrangements. This is an alternative to bankruptcy for debtors that cannot manage their unsecured debts. The most similar Scottish arrangement would be a protected trust deed.
Personal Insolvency Arrangements. This solution take the debt settlement arrangement to the next level as it may restructure secured debts as well as unsecured debts.
Bankruptcy. With a term prior to discharge reduced from twelve years to three years.
If you’d like to investigate this new set of insolvency arrangements further you can find a useful solutions framework summary with further links to more detailed explanations of each solution individually.
Like Trust-Deed.co.uk, “Debt Advice Ireland” also incorporates a forum where Irish residents will be able to seek information about their debt resolution options. The answers to the questions will be provided by a panel of experts that have passed the new exams for “personal insolvency practitioners” that equip them to handle formal personal insolvencies in Ireland. It’s hoped that these debt advice forums for Ireland will prove as useful to site visitors there as they have proven to be in Scotland.
We’ll return to this subject further in the future. There are many interesting parallels between the Scottish and Irish insolvency systems. There are also some key differences. It may well become the case that each system develops in the future according to the experiences of change and evolution in the other.
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