Debt Relief Notices – The Details
The new Irish Personal Insolvency Laws have introduced something called a Debt Relief Notice. The Debt Relief Notice process is like a simplified bankruptcy. It allows for the write off of up to €20,000 of debt after 3 years .
Debt Relief Notices are only for debts of €20,000 or less and only for people who have no income and no assets, are insolvent and have no realistic prospect of paying their debts within the following five years. In particular, this will be of relevance to those who do not own their home.
Who qualifies for a Debt Relief Notice
You may be eligible for a Debt Relief Notice if ..
a) your net monthly disposable income is €60 or less. (Your disposable income is your income after deductions for reasonable living expenses and payments to cover debts that are excluded from this process) . All income, with the exception of Child Benefit, is taken into account.
b) The total value of your assets is €400 or less. Assets include savings, shares and property.
Assets do not include:
· Essential household equipment and appliances
· Books, tools or equipment needed for employment or business
· One motor vehicle up to a value of €1,200 or a vehicle that is specially adapted for you as a person with a disability
The Debt Relief Notice covers most types of debt, for example, debts arising from credit cards, overdrafts, personal loans and utility bills. If you owe money because of a hire purchase agreement, you must give up possession of the relevant goods. The outstanding amount can then be treated as a qualifying debt for the purposes of a Debt Relief Notice.
The following debts are excluded from the process:
· Debts under family law orders – for example, maintenance orders for spouses and children
· Taxes, duties or levies owed to the State including the Household Charge and rates
· Money owed to the Health Service Executive (HSE) under the Nursing Homes Support Scheme
· Debts due to owners’ management companies in respect of annual service charges for multi-unit developments
· Debts due under court awards for personal injuries or death
· Debts arising from a loan (or forbearance of a loan – an arrangement to postpone or otherwise rearrange payments) obtained through fraud or similar wrongdoing
Who is not eligible
You will not be able to get a Debt Relief Notice if:
· You have already had one
· You have applied for a protective certificate in the previous 12 months
· You are currently a party to a Debt Settlement Arrangement or a Personal Insolvency Arrangement or you have successfully completed such an arrangement within the previous five years
· You are involved in bankruptcy proceedings, you are an undischarged bankrupt or you have been discharged from bankruptcy in the previous five years
· You incurred 25% or more of the debts in the six months before you applied
· In the previous two years, you have entered into any transaction at an undervalue or given a preference to any person (where you have intentionally done something to put one creditor in a better position than others)
You may apply for a Debt Relief Notice only through an approved intermediary (the Insolvency Service are going to decide who will be approved intermediaries.) The Money Advice and Budgeting Service (MABS) will be an approved intermediary .
Approved intermediaries may not charge you any fees for their services but the Insolvency Service may give them a grant out of the fees that it collects for its services.
Approved intermediaries will not be liable for damages resulting from their actions unless there is bad faith involved – in effect, the usual rules about professional negligence will not apply to them.
You must disclose all details of your financial affairs to the approved intermediary. The intermediary will then advise you whether or not you meet the conditions for a Debt Relief Notice, the consequences of getting such a notice, the alternative options that may be available to you, and the fees (if any) that you may incur in the process. If you decide to proceed, you must confirm this intention in writing.
The intermediary will help you to complete a Prescribed Financial Statement and will process the application if they consider that:
· The information in your statement is complete and accurate
· You meet the conditions for eligibility
· It is appropriate for you to apply for a Debt Relief Notice (note that appropriate means that there is a reasonable prospect that getting such a notice would facilitate you becoming solvent within five years)
If the intermediary is satisfied about all of this, they will issue a statement to that effect.
The application is then made to the Insolvency Service. The application must include all the details of your financial affairs and your debts. If the Insolvency Service considers that the application is in order, it will issue a certificate to that effect and notify the Circuit Court. The Circuit Court will then review the application and documentation and, if satisfied that the conditions are met, will issue a Debt Relief Notice.
The Court will notify the Insolvency Service, the approved intermediary, you and the relevant creditor(s) of the notice. The notice will relate to specific debts and specific creditors; you may well have other debts that are not covered by it and those creditors are not affected by it. The Insolvency Service will put details of the notice on its Register of Debt Relief Notices.
If you get a Debt Relief Notice, you will be subject to supervision for three years. This period may be extended by the court in certain circumstances.
During the supervision period, the creditor(s) will not be allowed to pursue any action against you for the recovery of the debt. If the debt was guaranteed by another person, the creditor may take action against that person.
During the supervision period, you will be obliged to tell the Insolvency Service of any change in your circumstances, for example, any increases in income, assets or liabilities. If you receive a gift worth €500 or more, you must surrender half of it to the Insolvency Service. If your net income (after tax, PRSI and Universal Social Charge) increases by more than €250 a month, you must surrender half of that increase as well. If you manage to surrender half of the total debts covered by the Debt Relief Notice, then you no longer have to surrender any further money. You may not get credit of €650 or more from any source without informing that source that you have a Debt Relief Notice.
At the end of the 3 year supervision period – the Debt Relief Notice ends and you are discharged from the debts and any interest or penalties on those debts. Your name is then removed from the register and you are given a Debt Relief Certificate