Hundreds of personal insolvency and debt settlement arrangements are "in the pipeline" following the issuing of the State's first certificate of protection under new insolvency legislation, the Insolvency Service of Ireland (ISI) has said.
The ISI welcomed the first ever debt settlement arrangement protection certificate issued at the Circuit Court in Monaghan on Monday and said it anticipated many more in the near future.
The certificate was issued by Judge William Lyster, a specialist judge assigned to the northern circuit to hear insolvency cases.
The recipient, a 41-year-old Donegal man with debts of more than €100,000, will now have the protection of the court until December 30th, giving him time to come to a settlement with his creditors.
He was advised by insolvency and advocacy group New Beginning and his personal insolvency practitioner was Ronan Duffy of McCambridge Duffy, of Letterkenny and Derry.
A debt settlement arrangement is one of three new debt resolution mechanisms introduced under the Personal Insolvency Act 2012.
It is designed for those who have no prospect of paying off their debts in the next five years.
Unlike a personal insolvency arrangement, a debt settlement arrangement applies to unsecured debt only and has no maximum figure.
The arrangement must be agreed by the debtor and then approved by 65 per cent of his creditors.
It can be applied to debts including the balance of a mortgage owed to a lender once the property itself has been dealt with, such as through sale or repossession.
If creditors agree to the arrangement, money is paid out to them over five years, after which the debtor is discharged from his debts.
A spokesman for the ISI said they were very happy that the court had issued the first protection certificate.
The certificate has now been included on the service’s website, he said and, if creditors agree to a settlement, it will be included on a register of debt settlement arrangements.
The spokesman said the service was aware of hundreds of settlement arrangements in the pipeline, but said there was a “significant amount of documentation needed” to pull together each application before it goes to court. It was a matter for the specialist judges of the courts, he said, but the service was anticipating many more protection certificates issuing before Christmas.
He added that it would take time for a number of successful cases to be seen going through the process for people to “get comfortable” with it.
Applications for bankruptcy are also expected to rise. New Beginning barrister Vincent P Martin has predicted an “avalanche” of cases in the coming months once legislation that shortens the bankruptcy terms from 12 to three years is enacted.
The change in the bankruptcy system was introduced as part of the Personal Insolvency Act 2012, but while most of the Act has already become operational and three new mechanisms to deal with debt have been introduced, the element dealing with bankruptcy was not.
A spokesman for the Department of Justice said yesterday the section dealing with bankruptcy would be commenced in the next couple of weeks.
