The Personal Insolvency Bill was passed by the Houses of Oireachtas on the 19^th December 2012. In accordance with the Constitution, it will now be presented to the President for signature. The Personal Insolvency Bill brings about a fundamental reform of our insolvency and bankruptcy law. It proposes the establishment of the Insolvency Service of Ireland who will be responsible for monitoring the operation of the various arrangements relating to personal insolvency. 

The Bill cuts the bankruptcy period from 12 to 3 years and also establishes Voluntary debt settlement systems to enable people struggling with debts to avoid having to go to Court to resolve their debt problem. The Bill offers three options to people struggling in debt to help them resolve their problems before bankruptcy. The 3 options are as follows:

1. The first option involves a Debt Relief Notice which allows, subject to satisfying certain conditions, the write off of qualifying debts totaling not more than €20,000 for persons with no "income – no assets" and who are insolvent and have no realistic prospect of being able to pay their debts within the next 5 years. The intention is to create an efficient way for people to deal with debt without having to go to court. There are a number of conditions that must be satisfied including the debt not exceeding €20,000. You must have a net monthly disposable income of €60 or less after provision for "reasonable" living expenses and payments in respect of excluded debts (if any), you hold assets (separately or jointly) to the value of €400 or less. Certain debts are excluded such as taxes, court fines, family maintenance payments and service charges arrears. An application to the Insolvency Service for a Debt Relief Notice must be made on your behalf by an approved authorised intermediary body, (e.g. the Money Advice and Budgeting Service – MABS). The Debt Relief Notice will last for 3 years and if your circumstances have not improved, the debt will be written off. You can only get one Debt Relief Notice during your lifetime and you cannot get one within 5 years completion of a Debt Settlement Arrangement or Personal Insolvency Arrangement. You must keep the Insolvency Service and your approved intermediary body informed of any material change in financial circumstances such as receiving financial gifts or inheritances.

2. The second option is the Debt Settlement Arrangement which provides for a system of Debt Settlement Arrangements between a person and one or more creditors to repay an amount of unsecured debt over a period of up to 5 years (with possible agreed extension to 6 years). This system is in place for people who do not qualify for a Debt Relief Notice. The application for a Debt Settlement Arrangement must be made through a Personal Insolvency Practitioner appointed by you. You can only apply for one Debt Settlement Arrangement during your lifetime. If conditions are met, the Insolvency service will arrange for a Protective Certificate to issue from the court. This will give you 70 days protection from your creditors and allow your Personal Insolvency Practitioner to propose a Debt Settlement Arrangement to your creditors. The Debt Settlement Arrangement proposal does not require you to sell your family home. If the Debt Settlement Arrangement is accepted by your creditors, it is binding on all parties.

3. The third option is Personal Insolvency Arrangements which provides for a system of Personal Insolvency Arrangements between you and your creditors to repay an amount of both secured and unsecured debt over a period of 6 years (with possible agreed extension to 7 years). This is aimed at helping people struggling with mortgage debt. The application for a Personal Insolvency Arrangement must be made through a Personal Insolvency Practitioner. You can only propose a Personal Insolvency Arrangement if you are cash flow insolvent (i.e. unable to pay his or her debts in full as they fall due) and there is no likelihood within a period of 5 years that you will become solvent. You can only avail of one Personal Insolvency Arrangement in your lifetime. As with a Debt Settlement Arrangement, if certain conditions are met, you get protection from your creditors for 70 days. This gives you the time to propose the Personal Insolvency Arrangement. again you do not have to sell your family home however certain specific protections for secured creditors, including a "claw back" in the event of a subsequent sale of a mortgaged property where the mortgage has been written down. The Personal Insolvency Arrangement proposal must be accepted by at least 65% of your creditors and if it is, it is binding on all creditors. There is provision for an annual review and the Personal Insolvency Arrangement can be varied or terminated. If the Personal Insolvency Arrangement fails, you can apply for bankruptcy. If the Personal Insolvency Arrangement is a success, all unsecured debts covered by it are discharged. Secured debts are only discharged at the conclusion of the Personal Insolvency Arrangement, if and to the extent, specified in the Personal Insolvency Arrangement. If they are not provided for in the Personal Insolvency Arrangement, all other debt obligations will remain.