The personal insolvency legislation seeks to balance the interests of debtors, creditors and the common good. The Act recognises that creditors have a legitimate interest in recovering debts due to them: one of the objectives of the Act is to enable creditors to recover debts owed by insolvent debtors, to the extent that the means of those debtors reasonably permit, in an orderly and rational manner.

Both debtors and creditors have certain rights and obligations under the Act.

There are three insolvency solutions that are alternatives to bankruptcy :

The Debt Settlement Arrangement and Personal Insolvency Arrangement processes involve a creditors’ meeting at which creditors will be entitled to vote on the proposed arrangement.

A qualified majority of creditors will be required in order for the meeting to approve the proposed arrangement. A creditor voting at such a meeting will wish to consider whether, having regard to the financial circumstances of the debtor, the proposed arrangement represents a fair financial outcome for the creditor, in particular when compared to the alternative of the debtor being adjudicated bankrupt.

The Act does not require creditors to participate in the DRN, DSA or PIA processes. However, the Act contains provisions which may have adverse implications for certain creditors where they decline to participate. It should be noted that non-participation by a creditor will not prevent an insolvency measure provided for under the Act from coming into effect and binding that creditor.

Creditors in bankruptcy

Information for creditors involved in bankruptcy is dealt with here.