Category Archives: Debt Settlement Arrangements

ISI Accepting Applications for Insolvency from Sept 9th

The Insolvency Service of Ireland (ISI) announced that it will start accepting applications on Monday the 9th of September.
from authorised Personal Insolvency Practitioners and Approved Intermediaries for the new debt reliefs on behalf of insolvent debtors under the Personal Insolvency Act.

 Debt Relief Notices and Protective Certificates

The ISI will begin accepting applications for Debt Relief Notices and Protective Certificates linked to applications for Debt Settlement Arrangements and Personal Insolvency Arrangements from Monday 9th September.

In advance of this date, insolvent debtors can arrange to meet with duly authorised Personal Insolvency Practitioners or Approved Intermediaries to discuss their situation.

 

Summary of New Insolvency System in Ireland

The Insolvency  Act will  introduce 3 new debt resolution mechanisms to help mortgage-holders and other people with unsustainable debt to reach agreements with their creditors. It will probably be July before anyone can apply for any of these.

The three proposed new mechanisms are summarised below :  Click on the links to find out more about each of them

 

A Debt Relief Notice (DRN) to allow for the write-off of debt (generally unsecured ) up to €20,000, subject to a 3-year supervision period

A Debt Settlement Arrangement (DSA) for the agreed settlement of unsecured debt, with no limit involved, normally over 5 years

A Personal Insolvency Arrangement (PIA) for the agreed settlement of secured debt up to €3 million (though this cap can be increased) and unsecured debt, with no limit involved, normally over 6 years

The Personal Insolvency Act will also introduce automatic discharge from bankruptcy, subject to certain conditions, after 3 years as opposed to 12 years at present.

Insolvency Service of Ireland Website

The Insolvency Service of Ireland is planning to fully launch it’s website in April. The ISI  full publicity campaign launch was  scheduled for the week of  8th of April 2013. That has now been delayed until “mid April”

During April ISI plan to publish  guides to the three new arrangements: Debt Relief Notices (DRN), Debt Settlement Arrangements (DSA) and Personal Insolvency Arrangements (PIA).

The  Insolvency Service of Ireland website will contain various scenarios as to how the new arrangements may work in practice.

The ISI will also publish  Guidelines on Reasonable Standard of Living and Reasonable Living Expenses for debtors.

During that week they will also publish  information about the Regulations for the authorisation and licensing of Personal Insolvency Practitioners (PIP).

The website will be  www.isi.gov.ie

Debt Settlement Arrangements

Debt Settlement Arrangement (DSA)  is something we might  be hearing a lot more about in Ireland soon.  New Irish  Insolvency laws are being introduced in 2013 to try and  help people sort out debt problems without resorting to legal action.
Debt Settlement Arrangements will allow  an agreement between you and your creditors (people you owe money to) to pay all or part of your debts off over a set period.

A DSA only applies to unsecured debts such as credit card, personal loans, overdrafts, retail, store catalogues, etc which amount to more than €20,000.
For debts below €20000 you need to look into a Debt Relief Notice .

The first stage is to find  a personal insolvency practitioner  (PIP) , who will examine your ircumstances, complete a financial statement of affairs and apply to the Insolvency Service for a Protective Certificate in respect of preparation of a DSA.
If granted –  the Protective Certificate would allow you a 30 days during which creditors may not take action against you.

The next step is for the personal insolvency practitioner to forward a DSA to your creditors for their agreement. The proposal would set out the amounts to be repaid by you  over a five year period and any special conditions.

If the repayment proposal is accepted by your creditors (by a vote of 65% in value of qualifying creditors), the Insolvency Service would provide formal registration of the Debt Settlement Arrangement

At the satisfactory conclusion of the DSA after 5 years, all of your  debts covered by it would be discharged in full.  You will not be able to apply for another DSA within a ten-year period.

A DSA will likely be subject to annual review by the PIP to reflect any changes in your fiinancial circumstances. It may be varied or terminated and you  could still be subject to an application for adjudication in bankruptcy on the ending, termination or failure of the DSA.

There are grounds for challenge by creditors to a  DSA proposal and there is a role for the courts on application to have a DSA annulled.

 

Insolvency Laws Need to be Carefully Drafted

The European Commission produced a report on Ireland this week – titled Economic Adjustment Programme for Ireland — Winter 2011 Review

They noted that ……

Progress continues to be made towards reforming the personal insolvency framework, including amendments to the Bankruptcy Act and the creation of structured non-judicial settlement and restructuring systems. An important element of the authorities’ strategy in this regard, as reflected in the Heads of the Personal Insolvency Bill approved by the government and published on 24th January 2011, is the proposed establishment of a dedicated Insolvency Service to oversee the main elements of the out-of-court debt resolution process. These include:

(i) debt relief certificates (DRCs). These certificates are intended to benefit persons who have no assets and no income and are unable to pay relatively small unsecured debts (the debt obligation needs to meet certain conditions, including being not larger than EUR 20,000);

(ii) debt settlement arrangements (DSAs). These are meant to allow the settlement of unsecured debts larger than EUR 20,000 between a debtor (who has income and assets) and two or more creditors; and

(iii) personal insolvency arrangements (PIAs), which allow for the agreed settlement and/or restructuring of both secured and unsecured debts larger than EUR 20,000 (up to a ceiling of EUR 3 million) between a debtor (who has income and assets) and one or more creditors.

The legislation will be carefully drafted to prevent expectations of debt forgiveness for solvent debtors. While the inclusion of secured debt (e.g. mortgages) in the non-judicial framework can be an important element in facilitating the development of adequate strategies to address the pertinent issue of mortgage distress, it should be carefully formulated in order to prevent an adverse impact on borrower behaviour and unintended consequences for the profitability of Irish banks.

Thus the authorities appropriately intend to permit DSAs and PIAs only on a voluntary basis so that the consent of the debtor and a majority of the creditors would be required.

As regards the reform of the 1988 Bankruptcy Act, the key element of the authorities’ strategy is the reduction of the automatic discharge period from the current 12 years to 3 years, which aims to make the bankruptcy process less punitive and costly for consumers, while ensuring that banks’ incentives to supply credit in future are not unduly affected. The discharge period can be extended to 8 years where the debtor has been uncooperative, dishonest or engaged in wrongful conduct. Provision is also made for income payment orders for up to 5 years from the bankruptcy discharge.

Following completion of on-going consultation with relevant government departments and the Attorney General and further refinement, the Personal Insolvency Bill is expected to be published in full by the end-April 2012 programme deadline.