Appeal a rejected PIA
When your PIA proposal has been rejected by your creditors and you are left with the possibility of facing Bankruptcy, it can be very worrying. However, it may not be quite the end of the road for you with regards to your PIA. Recent amendments to the current Insolvency legislation (Personal Insolvency Act 2012) have been made and are now in effect that allow you to appeal the rejection of a PIA proposal through the court. The court has the power to overturn any rejected PIA proposal if they believe it to be a plausible one.
When is a rejected PIA suitable for appeal?
You need to have reasonable grounds in order to ask the court to review the decision of your creditors to reject your PIA proposal and to reverse that decision. Your PIP (Personal Insolvency Practitioner) will discuss these grounds with you but, ultimately it will be your decision whether to appeal the matter. There are already over twenty appeals in the pipeline awaiting court hearings since this amendment was introduced.
The court decision to overturn a rejected PIA
The court will have to ensure certain criteria is met before it allows the appeal to proceed and overturn the decision of your rejected PIA. They will want to determine:
- That the terms of the PIA have been formulated in compliance with section 104 of the act
- That there is a reasonable prospect that confirmation of the proposed PIA will:
- Enable you (the debtor) to resolve your indebtedness without recourse to bankruptcy
- Enable your creditors to recover the debts due to them to the extent that your means reasonably permit
- Enable you not to dispose of an interest in nor to cease to occupy all of or a part of your principal private residence (PPR).
The court will also have to satisfy itself that:
- you are reasonably likely to be able to comply with the terms of your proposed PIA;
- the costs of enabling you to continue to reside in your PPR are not disproportionately large;
- the proposed PIA is fair and equitable to each class of creditors that has not approved the proposal and whose interests or claims would be impaired by its coming into effect;
- the proposed PIA is not unfairly prejudicial to the interests of any interested party.
Crucially, the court must also be satisfied that at least one class of your creditors must have accepted the PIA proposal by a majority of over 50% of the value of the debts owed to that class (The court may consider one creditor to be a class of creditors or it may consider more than one creditor to be such a class, where it considers the creditors to have in relation to the debtor, interests or claims of a similar nature. In making its decision as to whether a creditor or a number of creditors constitute a class of creditors the court shall have regard to various criteria as set out in the act as amended.).
The court, in making its decision is also required to have regard to various other matters including the conduct, in the two years prior to the issue of the protective certificate, of both you, the debtor (in seeking to pay the debts concerned) and the creditor (in seeking to recover the debts due). In particular the court will have regard to any alternative options available to the creditor for the recovery of the debt concerned.
The next few months promise to be fascinating as courts hand down decisions on the cases brought to them for review, particularly those cases where the proposed PIA purported to afford creditors a better return than what would be achieved from the debtor’s bankruptcy, which would almost certainly entail the debtor’s loss of their PPR.
McCambridge Duffy making history - The first successful appeal
On February 11th 2016, we won the first appeal to overturn a rejected PIA; the first of it's kind in Ireland since the new amendment to The Insolvency Act was brought in. This is amazing news as it signifies a step in the right direction for the Insolvency regime in Ireland. Now people have another chance to get realistic proposals accepted where creditors are not willing to support the proposal.
Article written by: Paddy Byrne