Insolvency explained

Under new personal insolvency laws due to come into force later this year, three new debt- resolution mechanisms will be available to help mortgage holders and other people with serious debts to reach agreements with their creditors. Different measures apply depending on the size and nature of the debt.

This includes secured debt – such as a loan against which property or goods has been used as security, eg a mortgage – and unsecured debt, such as that for credit card. The three new mechanisms are:

A “debt-relief notice”. This will allow for the write-off of debt (typically unsecured debt) of up to €20,000, subject to a

three-year supervision period.

A “debt-settlement arrangement”. This is for the agreed settlement of unsecured debt, with no limit involved, normally over five years.

A “personal-insolvency arrangement” for the agreed settlement of secured debt up to €3 million and unsecured debt without any limit, normally over

six years .

The new legislation will also introduce discharge from bankruptcy after three years, as opposed to 12 . Government officials expect about 15,000 applications to the two main debt-resolution processes – the debt-settlement arrangement and personal-insolvency arrangement.

They also expect a further 3,000 to 4,000 applications for debt-relief notices in the first full year, and about 3,000 bankruptcy applications during this time, a dramatic increase over the 30 bankruptcy adjudications in 2011.