Debt and taxes
Should personal insolvency arrangements have regard to wider public-interest considerations where exceptionally large personal debt write-downs are proposed? Dr Karen O’Brien tightens up the bench vice
The introduction of the Personal Insolvency Act 2012 fundamentally reshaped Irish debt law by enabling financially distressed individuals to achieve financial rehabilitation while ensuring creditors received a fair and reasonable return.
Criticism that the act favoured creditors prompted the enactment of the Personal Insolvency (Amendment) Act 2015. This made a key legislative change by introducing section 115A, which strengthened that framework by empowering the High Court, in certain circumstances, to approve a personal-insolvency arrangement, notwithstanding creditor objection.
More than a decade later, the courts have developed a substantial body of jurisprudence interpreting section 115A. Yet, one question remains largely unexplored: should the legislation expressly require the High Court to have regard to wider public-interest considerations where exceptionally large personal-debt write-downs are proposed?
For most personal-insolvency arrangements, such a consideration would be unnecessary. Personal insolvency primarily resolves private disputes between debtors and creditors.
However, exceptionally large debt compromises may, in rare cases, raise issues of public confidence, transparency, and the administration of justice. Whether those wider considerations should form part of the court’s statutory assessment is ultimately a question of legislative policy.
Regulatory gap
Section 115A carefully defines the matters to which the High Court must have regard when deciding whether to approve a personal-insolvency arrangement. The courts’ role under section 115A is carefully prescribed.
They consider whether the proposal is fair and equitable, whether creditors are likely to receive a better outcome than bankruptcy, whether the debtor has acted honestly, and whether the arrangement is sustainable.
These statutory criteria have served the insolvency system well. They reflect the legislation’s central objective of balancing financial rehabilitation with creditor protection.
The courts have consistently applied section 115A according to the statutory criteria laid down by the Oireachtas. Those criteria appropriately focus on fairness, sustainability, and creditor protection.
Decisions such as Re Nugent (2016) and Re Callaghan (2017) illustrate the courts’ careful adherence to those statutory requirements. The issue explored here is, therefore, not one of judicial interpretation, but whether those statutory criteria remain complete in exceptional cases.
The current frameworks focus heavily on commercial viability and creditor consensus, often overlooking broader economic or societal impacts. What they do not expressly require is any consideration of wider public interest where exceptionally large personal-debt write-downs are proposed.
This omission is entirely understandable. Personal-insolvency legislation was designed to resolve private disputes rather than broader questions of public policy.
Nevertheless, exceptionally large personal-debt compromises occasionally attract considerable public attention. The sums involved, the identity of the debtor, or the involvement of regulated lenders may generate wider concerns extending beyond the immediate parties to the arrangement.
At present, section 115A makes no distinction between a personal-insolvency arrangement involving debts of €500,000 and one involving liabilities of €50 million. The same statutory criteria apply, irrespective of scale. Whether that approach remains appropriate where proposed debt compromises reach an exceptional scale is a legitimate matter for legislative policy.
Defining ‘exceptional’
Any proposal for reform must be carefully limited. The success of Ireland’s personal-insolvency regime lies in its accessibility and efficiency. Introducing additional statutory requirements for ordinary debtors would undermine those strengths.
A public-interest assessment should, therefore, arise only where objectively defined statutory thresholds are met.
One possibility would be to prescribe a monetary threshold above which the court would need to consider whether wider public interests were engaged. Alternatively, legislation might identify factors, such as substantial public financial exposure, significant implications for regulated financial institutions, or exceptional levels of indebtedness.
The concept of applying different statutory rules to cases involving substantial liabilities is not unfamiliar to the Personal Insolvency Act. The act already recognises that exceptionally large, secured indebtedness may warrant distinct statutory treatment through the €3-million eligibility threshold in section 91.
A limited public-interest assessment applying only in similarly exceptional cases would, therefore, build upon an existing legislative distinction, rather than introduce an entirely new principle
Proposed mechanism
The proposal is not intended to distinguish between wealthy and ordinary debtors. Honest but unfortunate debtors should remain equally entitled to rehabilitation. The distinction lies only where the scale of a proposed compromise may engage wider public interests beyond the immediate parties.
The phrase ‘public-interest assessment’ should not be misunderstood. It would not authorise courts to determine cases according to public opinion or political considerations. Nor would it replace the carefully balanced statutory criteria already contained within section 115A.
Instead, it would become one additional statutory consideration available only in exceptional cases. Where predetermined legislative thresholds were satisfied, the court could consider whether the exceptional scale of the proposed debt compromise raised issues affecting the wider administration of the insolvency system.
Any reform should operate only where clearly defined statutory thresholds are met. It would supplement, rather than replace, the existing section 115A criteria, and would permit consideration of matters such as transparency, public, and broader policy implications without conferring an unfettered judicial discretion.
A personal-insolvency practitioner could provide a concise statement addressing any relevant public-interest considerations where statutory thresholds were met.
Alternatively, the court could retain discretion to seek additional evidence where necessary. The assessment would remain advisory rather than determinative. The debtor would still be required to satisfy every statutory requirement contained within section 115A. The public interest would simply become one additional factor available to the court in a very limited category of exceptional cases.
Comparative analysis
Ireland’s personal-insolvency regime is founded upon a careful balance between debtor rehabilitation and creditor protection. Section 115A reflects that balance by empowering the High Court, in limited circumstances, to approve a personal-insolvency arrangement, notwithstanding creditor objection, where the statutory requirements are satisfied.
The legislation is, therefore, primarily concerned with the private legal relationship between debtor and creditor. Comparative experience, however, demonstrates that modern personal-insolvency regimes increasingly recognise that insolvency law also serves wider public-policy objectives extending beyond debt enforcement alone.
In England and Wales, individual voluntary arrangements provide a statutory mechanism through which debtors may compromise their liabilities while avoiding bankruptcy. Creditor approval remains central to the process, reflecting the importance of creditor autonomy.
At the same time, the legislative framework seeks to encourage financial rehabilitation and reduce the social and economic consequences of over-indebtedness.
The English approach, therefore, illustrates that creditor rights and debtor rehabilitation are complementary objectives within a modern personal-insolvency system, rather than competing interests.
Australia’s Bankruptcy Act 1966 adopts a slightly different emphasis. Similarly, Canada’s Bankruptcy and Insolvency Act reflects a dual statutory purpose. Australia and Canada recognise that personal-insolvency law pursues broader economic and social objectives alongside creditor protection.
While none of these jurisdictions has adopted an explicit statutory public-interest assessment equivalent to that proposed here, each recognises that modern personal-insolvency laws serve broader economic and social objectives alongside resolving disputes between debtors and creditors.
Their experience demonstrates that insolvency legislation can legitimately promote public confidence in the legal and financial system without undermining creditor protection.
The introduction of section 115A reflected a significant policy decision that creditor opposition should not invariably defeat a sustainable restructuring proposal where the statutory safeguards are satisfied. The question explored in this article is whether that policy evolution should continue.
In the rarest cases involving exceptionally large personal-debt compromises, there may be merit in permitting the High Court to have regard to wider public-interest considerations.
Such a reform would not depart from the philosophy underpinning Ireland’s personal-insolvency legislation. Rather, it would build upon the internationally recognised principle that effective insolvency law must balance debtor rehabilitation, creditor protection, and public confidence in the legal and financial systems.
In that context, it would represent an incremental development of section 115A, rather than a departure from its underlying philosophy.
Impact on the profession
From a professional perspective, the practical implications of reform would likely be modest. Personal-insolvency practitioners already prepare detailed financial analyses and statutory documentation. In exceptional cases, they might also provide a brief statement identifying any public-interest considerations relevant to the court’s assessment.
The principal change would be evidential rather than procedural. Existing statutory documentation would remain central, with the public-interest assessment arising only where the prescribed legislative threshold was satisfied.
Solicitors advising debtors and creditors would similarly consider whether a case satisfies the statutory threshold for additional review and arrange submissions, where appropriate.
For the judiciary, the proposal would represent only a modest extension of the existing statutory assessment. Because few cases would satisfy the proposed threshold, any additional administrative burden would be minimal, while enhancing transparency and public confidence.
Modest proposal
Section 115A has become one of the most successful features of Ireland’s personal-insolvency framework. It has enabled the courts to strike an effective balance between debtor rehabilitation and creditor protection, while ensuring that viable restructuring proposals are not defeated solely through creditor opposition. For almost every case, the existing statutory framework remains entirely appropriate.
However, exceptionally large personal-debt write-downs may occasionally raise issues extending beyond the immediate interests of debtors and creditors. Those wider considerations are not currently reflected within the statutory framework.
The proposal advanced in this article is, therefore, a modest one. It is not an argument for restricting access to personal insolvency or for treating wealthier debtors differently. Rather, it asks whether, in the rarest and most exceptional circumstances, section 115A should expressly permit the court to consider whether the scale and consequences of a proposed debt compromise engage the wider public interest.
The issue is not whether it has failed, but whether it should evolve to recognise that debt compromises may engage interests beyond those of the debtor and creditor alone.
More broadly, the implementation of the outstanding provisions of the Personal Insolvency (Amendment) Act 2021 should now be treated as a legislative priority.
Whether by commencing those remaining reforms or by considering further targeted amendments, the continued evolution of Ireland’s personal-insolvency framework is essential to ensure that it remains responsive to both practical experience and the public interest. Ultimately, whether such reform is justified remains a matter for the Oireachtas.
Dr Karen O’Brien is a legal researcher and qualified personal-insolvency practitioner whose research focuses on Irish personal-insolvency law, comparative international-insolvency systems, and legislative reform.