Reports suggest that new government proposals to tackle consumer debt will include three separate voluntary debt settlement agreements and reduce the bankruptcy process to three years.
The choice of voluntary debt settlements will depend on the scale of personal debt and whether it is secured (mortgages) or unsecured.
Unsecured borrowings up to €20,000 may qualify for a one-year debt relief certificate — this would need approval by an insolvency service and an independent intermediary. Unsecured debt above €20,000 may avail of a debt settlement arrangement for up to six years.
The third proposed voluntary arrangement, personal insolvency, would cover both unsecured and secured debt — largely mortgages — for a period of up to seven years.
Commenting on the proposed measures, Davy Stockbrokers said: “Modernising Ireland’s bankruptcy legislation was one of the original commitments given by government to the EU/IMF troika. The government is expected to discuss details of the bill at today’s cabinet meeting although the recent review of the EU/IMF programme agreed that publication of the legislation could be deferred to end-April.
“The menu of voluntary options is welcome. All three arrangements are non-judicial and would require agreement between consumers and their lenders. Failure to agree a voluntary arrangement leaves distressed borrowers with the more extreme judicial alternative of bankruptcy, although bankrupts will now be able to emerge from the process after a three-year period.”