Redoing the ceiling of my attic...

I live in the Northeast in an old home... circa 1896. The ceiling of my attic is finished with foil-faced insulation which has several holes in the foil facing (ie poor condition). The space is about 25 X 35 feet, so I am going to convert it into a livingroom.
The foil-faced insulation is installed properly (foil facing living area), but the insulation is pressed to the bottom of the sheathing. Therefore, there is no ventilation, and has not been for several years. The insulation also currently takes up the full depth of the 2"x6" rafters.
???How should I prepare the attic ceiling for being finished with drywall? Should I keep the old insulation? Replace the old insulation? Add to the old insulation (which would require some type of furring out of the current 2x6 rafters, or sistering with deeper rafters)???
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