Bullet points for amendments to draft heads of the Personal insolvency Bill

1. What is the function of bankruptcy – is it to rehabilitate or to punish? The treatment of the bankrupt will follow from this.

2. If the bankruptcy process remains too onerous the Irish process will have to compete with the liberal insolvency regime in the UK.

3. Where there is a pre-bankruptcy insolvency process (DRC, DSA, PIA), the outcome for
all stakeholders (debtors, creditors and insolvency practitioners) must be;

a. Foreseeable
b. Transparent

4. When the outcome is transparent and foreseeable then the administration of the process will be straightforward and inexpensive. Remember that creditors pay the costs associated with the insolvency and so it is in their interest to ensure its simplicity.

5. Transparency means that all stakeholders know what considerations are given to the treatment of different classes of problem debt, including unsecured, preferential and secured debt. The failing with the current proposals is the lack of clarity regarding the treatment of secured debt which is the most significant category for most debtors.

6. Forseeability is required for the debtors and creditors to understand their position after
the process to enable them consider whether they can enter into a voluntary process, without the requirement to incur the costs associated with the processes

7. There is no independent adjudication process to consider whether the proposals put by the PIA unfairly prejudice any creditor. Given the imbalance between the resources of (principally) the secured creditors and the debtor then an independent process is an absolute requirement.

8. The thresholds associated with the processes as suggested are too low. A straw poll of insolvency practitioners and parties all agree that as matters stand they are not sufficient. Examples of people thus excluded are;
a. Individual guarantors of failed company loans, where the guarantor derived no personal
benefit from the money borrowed,
b. Junior partners to commercial arrangements where joint and several indemnities have
been given

9. The DSA is defined in the draft terms as an act of bankruptcy, whereas a PIA is not.

10. Judgement creditors achieve the status of secured creditor without account being made of
any equity available in the secured property

11. There is a significant risk that the treatment of revenue as preferential creditor will undermine the efficacy of the process. Any creditor class enjoying the right to be paid in full has the ability to frustrate any process. At this time there are two classes (secured creditors and preferential creditors) out of three who have the ability to render the process impotent.