Personal Insolvency Bill 2012 Michael Bolger – Head of Personal Insolvency With legal opinion from: Barry O Neill Part

1. Personal Insolvency Bill 2012Michael Bolger – Head of Personal Insolvency With legal opinion from:Barry O NeillPartnerEugene F. CollinsAugust 2012

2. Personal debt in IrelandLegal Overview of BillDebt Relief Notice (DRN's)Debt Settlement Arrangements (DSA's)Personal Insolvency Arrangement (PIA's)Case studiesQuestions and answers

3. Personal debt in Ireland

4. Debt pathways Well being POST-CRISIS EXPECTATIONS –STRUCTURED SOLUTIONS(egDSA,PIA, pay off the debt, Bankruptcy) - Optimism DEBT PROGRESSIVE DECLINE PRE-CRISIS Growth and ambition TIPPING POINTS CONTACT WITH MABS (ONGOING CRISIS) Positive future: New lifestyle free from debt. But risk of regression to pre-crisis, repetition of past failures (re-offending) Distress Debt Time

5. Physical/Somatic SLEEP APPETITE IBS: BLOOD PRESSURE: IMMUNE SYSTEM: weakened LIBIDO: SKIN: ABUSE: alcohol (smoking, drugs) Psychological EMOTIONAL: COGNITIVE: SOCIAL: CULTURAL: stigma blame banks, government, immigrant groups Debt psychologySymptoms

6. Denial Realisation of need Action • Ignoring bills • Hiding from partner • Escapism • Loss of utilities threat of bailiffs • Partner pressure • No or limited income • Paying redundancies, etc. • Advice • CAB • Online search • Grant Thornton contact Advice tipping points

7. Personal debt in Ireland Loan products which have substantially increased since 2003: Source: Central Bank Report June 2011

8. Personal debt in IrelandPrivate residential mortgage market in Ireland: • Note: • The above figures do not include buy to let mortgages • Total arrears amount to €1.5bn for private residential mortgages (includes <&>90 days) Source: Central Bank Report Aug 2012

9. Referral: MABs

10. Unemployment Black spots Source: census 2011

11. Personal debt in IrelandWhat is the age profile of the debtors- MABS Source: MABS report Nov 2011 www.mabs.ie

12. Personal Debt in IrelandProfile (UK) The typical debtor (UK) who enters IVA process… • average salary £21-24k (median average pay £21,221) • 63% home ownership • between 50-60% will be aged 25-44 • 90% will be employed • 70% male to 30% female • c.50% of new applicants are married.

13. Personal Debt in IrelandUK/Ireland comparison- Ireland population circa 9% of UK

14. Personal Debt in IrelandUK personal insolvency volumes

15. Personal Debt in IrelandComparison with UK

16. Debt Journey • Acceptance of the current situation • Need for debt advice • Understanding the options available • Creditor containment • Debt prevention

17. Legal Overview of Bill

18. Legal Overview of Bill • Context • Radical

19. Legal Overview of Bill • New law • Change

20. Legal Overview of Bill • New • Debt Relief Notice • Debt Settlement Arrangement • Personal Insolvency Arrangement

21. Legal Overview of Bill • Court • Insolvency Service • “Intermediary”

22. Legal Overview of Bill • PIA

23. Legal Overview of Bill • Court? • Circuit Court • High Court • €2.5million+

24. Legal Overview of Bill • Joint Proposal

25. Legal Overview of Bill • Once

26. Legal Overview of Bill • Domiciled • Residence (1 Year)

27. Legal Overview of Bill • €3M (Waiver?) • Home • 6 Years

28. Residence Legal Overview of Bill • “Co-operated” • 6 Months • Process

29. Process Legal Overview of Bill • No agreement • Unwilling

30. Process Legal Overview of Bill • Confirmation • Belief • Arrangement • Not solvent • 5 years

31. Legal Overview of Bill • 70 Days • No Action

32. Legal Overview of Bill • Judgement Mortgage

33. Legal Overview of Bill • Value • Agree • Expert

34. Legal Overview of Bill • Accounting • Records

35. Legal Overview of Bill • Sale • Surrender • Retention

36. Legal Overview of Bill • Residence

37. Legal Overview of Bill • Uplift

38. Legal Overview of Bill • Meeting

39. Legal Overview of Bill • 65% • 50% • Connected

40. Legal Overview of Bill • Vote? • Value • or • Debt

41. Debt Relief Notice (DRN)

42. Debt relief notice (DRN's)- Key eligibility criteria • Unsecured debts • debts < €20k • disposable < €60 per month • assets < €400 (can be increased to €1,200 if for motor vehicle/furniture) • 3 year protection • if >50% of debt paid DRN will cease to have affect • 75% of debt must be > 6 months

43. Debt relief notices (DRN's)- Typical creditors/debt • credit/store cards • credit union • personal loan/overdraft • utility bills

44. Debt Settlement Arrangement (DSA's)

45. Debt Settlement Arrangement(DSA's)-Key eligibility criteria • domiciled/place of business in Ireland (12 months) • provide prescribed financial statement (affidavit) • debts > €20k (no max) • unsecured debt only • 5 year period (with possible 1 year extension) • Personal Insolvency Practitioner (PIP) must be of the opinion that debtor is insolvent, with no likelihood of solvency in the next 5 years • all creditors/debts will be treated on a pro rata basis • once in a lifetime only

46. Debt Settlement Arrangement(DSA's) Typical debts/creditors • personal guarantees • credit union loans • personal loans/overdrafts • credit/store cards Protective Certificate • 70 days possible extension of 40 days • "creditor shall not terminate or amend that agreement" under 56 (1) F (i & ii) - Implications??? • "shall not operate to prevent a creditor taking actions as respects another person who has guaranteed the debts of the debtor" –under 56 (4) implications for guarantors??

47. Creditor will receive 14 days notice of creditors meeting (pack will include proposal, prescribed financial statement) from PIP Creditor will forward proof of debt and either the Creditor or an appointed agent will liaise with PIP on what terms are acceptable prior to creditors meeting. Creditor or representative will vote to accept or reject the proposal (either in attendance or by proxy) Process map - DSA The debtor will meet with PIP. PIP will formulate proposal based on representations made and information provided 70 days protective cert *(V imp that this phase is streamlined to keep costs to a min)

48. If proposal is not approved by 65% of the creditors present the process with the PIP will finish creditor may continue to pursue debtor as was the case prior to the process beginning Process map - DSA Phase 2 - if rejected

49. If proposal is approved by 65% of the creditors present If proposal is approved by 65% of the creditors present Creditor will receive a proposal document (contract) from PIP; Creditor will instruct PIP of account details & payment preferences If there is a material change in the debtors financial circumstances he/she is obligated to inform the PIP of same and a variation proposal will be submitted Creditor will receive payments quarterly & an annual statement from PIP on the performance of the account; Debtor will be discharged after 5 years if compliant unless a variation Process map - DSA Phase 2 - if approved Creditor will forward proof of debt and either the Creditor or an appointed agent will liaise with PIP on what terms are acceptable prior to creditors meeting. Creditor will receive payments quarterly & an annual statement from PIP on the performance of the account; Debtor will be discharged after 5 years if compliant

50. If there is a variation Creditor will receive14 days notification of a variation meeting and a variation proposal document from the PIP Creditor will vote to approve or reject variation- If 65% of creditors (present) vote to accept proposals All creditors will be bound. Debtor will be discharged after agreed however ability to increase by 1 year Process map- DSA Phase 3