Since its introduction in late 2013 many commentators have argued that the Personal Insolvency Act 2012 has not gone far enough in assisting those who are battling against unsustainable debt.
Certainly the number of successful Personal Insolvency Agreements (PIAs) being ruled upon has been underwhelming and far below the numbers that were expected.
One significant difficulty that has become apparent over the past year is the power that any majority creditor has to ‘veto’ a proposed PIA that has been negotiated between the debtor and his creditors.
However under new proposals the courts would effectively be empowered to overrule any rejection by a Bank of a proposed PIA if it deems the agreement to be ‘fair and reasonable’.
In what has been labelled as a major and essential reform of the current system, the Government has announced it extends this power to the Court in a reform that will assist the 30,000 home owners that are estimated to be in distress.
At present, a Bank or creditor is entitled to ‘veto’ a proposed PIA that has been negotiated between a person and its creditors if a majority of the debt is owed to it.
This is because 65% of the creditors must accept the PIA before it can be completed.
This can be extremely frustrating for those who have done all they can to satisfy their debts and have sought to deal with their problems by negotiating a practical solution with their creditors.
The reforms are expected to increase the amount of successful PIAs being ruled upon in the future and ensure that fair and sustainable deals are upheld for those willing to work their way out of difficulties while keeping their family home.