Category Archives: Insolvency Service

Insolvency Service Guidelines For Reasonable Living Expenses

When working out the monthly amount of debt repayments that someone can afford  – there will be  guidelines on how to calculate disposable income after housing costs and expenses needed to maintain a reasonable standard of living .

The Insolvency Service of Ireland say that having these guidelines will “help safeguard a minimum standard of living so as to protect debtors while facilitating creditors in recovering all, or at least a portion, of the debts due to them.”

The ISI guidelines for a single adult allow for a monthly expenditure of  €900.08 (where no car is needed ) Or  €1029.83  if they need a car (eg in rural areas)
This does not include housing costs (Rent or Mortgage) . There is also allowance in the guidelines for a debtor to specify other reasonable costs which arise as a consequence of ill-health or disability.

These guidelines are saying that after tax,prsi etc – this is the amount a person should be left with to live on. If they can’t make debt repayments from the remaining income – then they are insolvent.

These are the breakdowns of the guideline expenses€1029.83 for a single Adult  – Monthly

Food  € 247.04
Clothing  € 35.73
Personal Care  € 33.40
Health € 31.09
Household Goods € 31.47
Household Services € 28.61
Communications €43.45
Social Inclusion & Participation € 125.97
Education € 24.50
Transport (Private) € 240.13
Household Electricity € 48.87
Home Heating € 57.31
Personal Costs € 0.79
Home Insurance € 12.22
Car Insurance € 25.91
Savings & Contingencies € 43.33

The figure for a 2 adult household with no children  and needing a car – is  €1431.58 a month
So the guidelines only only allow an extra €401.75 a month for a couple compared to a single person .

There are additional expenditure amounts for children – they are different depending on the age of the child . The figures range from € 372.49 a month for an infant , € 163.67 a month for pre-school , € 294.71 for primary school age and €497.32 a month for a child of secondary school age .

These guidelines will be used when applying for a Debt Settlement Arrangement  or a Personal Insolvency Arrangement. The legislation states that   the DSA or PIA   “shall not contain any terms which would require the debtor to make payments of such an amount that the debtor would not have sufficient income to maintain a reasonable standard of living for himself or herself and his or her dependants. ”   .
The Personal Insolvency Bill also states that   ” in determining whether a debtor would have a sufficient income to maintain a reasonable standard of living for the debtor and his or her dependants, regard shall be had to these guidelines.”

For a Debt Relief Notice – to be eligible –  the debtor must have net disposable income, , of €60 or less a month. Disposable income is  income after tax/prsi/usc and deductions for reasonable living expenses and payments to cover debts that are excluded from this process)

For example – Take Home Pay €1500 a month
Single person’s reasonable  living expenses = 1029.83
Rent = €450 a month
Disposable Income =  1500 – 1029.83 – 450  =  20.87 a month
This is less than €60 – so they could apply for a Debt Relief Notice and possibly get up to €20k of debts written off

Target Dates for Insolvency Service Launch

Establishment of the Insolvency Service of Ireland (ISI)

The new Insolvency Service is urgently needed in Ireland to help sort out some of the people in mortgage arrears.

On March 13th the Department of Finance  announced some target dates for the Insolvency Service

They said that extensive work is taking place to get the new Insolvency Service of Ireland operational as early as possible in 2013 under its Director who was appointed in October 2012.

Applications from the public will not be accepted until June 2013

These are the milestones

Launch the Insolvency Service of Ireland website :  End-March 2013

Publish Guides to the three new arrangements :  End-March 2013

Put in place an information line for the public. :  End-March 2013

Publish Regulations for the authorisation and licensing of Personal Insolvency Practitioners :  End-March 2013

Publish Guidelines on a Reasonable Standard of Living and Reasonable Living Expenses for Debtors :  End-March 2013

Authorise and regulate approved intermediaries and personal insolvency practitioners :   Q2 2013

Commence taking applications from public :  June 2013

Note –  The targets have already been missed. The Insolvency Service of Ireland are now saying that they will not be launching the site until mid April

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 Judges to be paid €140,000

A  new group of “specialist judges” will be appointed to deal with all the insolvency actions due to come before the courts.These  specialist judges will receive the same salaries as newly appointed Circuit Court judges, will be regarded as full judges and must be addressed in court as “judge”.

The Judges will be chosen from   county registrars who will have to apply for the €140,623-a-year roles .

County registrars perform a number of quasi-judicial functions –  for example holding motions courts and case progression hearings, conducting arbitrations under the Landlord and Tenant (Ground Rents) Acts and the taxation of costs.  In addition, the county registrar has responsibility for the administration and management of the circuit court offices in each county.

Debt Write Offs Possible in Spring

The new  Insolvency Service of Ireland should be up and running and  accepting  debt relief applications in the second quarter of 2013 .
Any applications will be  published on a  public register

But the Department of the Taoiseach has said that its IT systems to deal with the applications may not be up and running until the second half of 2013.

Earlier this year the EU Commission warned that new personal insolvency laws could see the focus placed on larger  mortgage cases at the expense of smaller, hard-pressed homeowners in greater distress.

The maximum level of  debt write off under the insolvency legislation is €3m  – but the  EU commission have previously expressed concern that this might be “unduly high”.

The Government has approved an initial staff of 80 for the Insolvency Service, and eight Circuit Court judges will be allocated to deal with the cases.

Debt Relief Notice – How Will it Work ?

Under legislation due to come into force in Ireland in 2013 – A Debt Relief Notice  or DRN will  provide an alternative to bankruptcy  and will help you deal with certain types of debt if you :

  • do not own your home
  • have very  little spare income
  • have little chance of your financial situation improving

These notices  will be issued by a new body called the Insolvency Service and once you have one it means that :

  • your creditors (people you owe money to ) can’t take any action to recover their money.
  • you are not allowed to make any payments towards your debts
  • you will be discharged (freed) from your debts when the DRN ends –  after 3 years.

A DRN can be amended or cancelled if your financial situation improves.

To get a Debt Relief Notice  you must:
* owe less than €20,000
* have less than €60 a month spare income – after paying essential bills like rent or food
* have less than €400 worth of assets – (not including motor vehicles worth less than €1200)
* not have applied for a DRN in the last six years

An application for a Debt Relief Notice by a  debtor must be done through an  an approved intermediary . Details of approved intermediaries will be made public. MABS will be providing this service .

More information to follow when these DRNs are available on how to apply.

Personal Insolvency Arrangements

Personal Insolvency Arrangements – How will they work ?

New Insolvency laws are due to come into force in Ireland in 2013
One feature of the new rules is a  Personal Insolvency Arrangement.

If you have a mixture of secured and  unsecured debts that you cannot repay – you may be able to enter into a  Personal Insolvency Arrangement or PIA.
Unsecured debts are those  such as credit card, personal loans, overdrafts etc.  Mortgages are secured debts  – these might be on your own  principal private residence or on a  buy-to-let or investment property.

A PIA is for people with debts between €20,000 and €3,000,000 who are insolvent and it is unforeseeable that over the course of a 5  year period they will  become solvent

(If you are insolvent it means you are unable to pay your  debts in full as they fall due.)

A personal Insolvency Arrangement will  provide a mechanism for  debt settlement and restructuring if you are insolvent but  have the means to make part payments of your debts over a period of years.

An application for a Personal Insolvency Arrangement has to be made via a personal insolvency practitioner (PIP) . They will complete a standard financial statement with you setting out your financial affairs in full. The personal insolvency trustee will advise you about your  options and will assess whether you meet the eligibility criteria for a PIA. Those criteria include the following:

· You  must be “cash-flow”  insolvent (i.e. unable to meet your debts in full as they fall due);

· it is unforeseeable that over the course of a five year period, you will become solvent;

· a debt settlement arrangement (DSA) would not be a viable alternative to a PIA as a mechanism to make you  solvent within a period of five years.

If the personal insolvency practitioner is satisfied that you meet the above eligibility criteria and is satisfied that there is a reasonable possibility that a PIA would be capable of making you solvent within six years, the personal insolvency trustee applies to the Insolvency Service for a protective certificate.
The Insolvency Service carries out certain checks in relation to the application and issues a protective certificate which protects you from action by your creditors for a minimum of 40 working days (and up to a maximum of [60] working days, subject to extension for a further [10] working days).

The personal insolvency trustee notifies your creditors and sends them prescribed information, including information about your financial situation.
The personal insolvency trustee considers any submissions from creditors and prepares a proposal for a PIA, taking into account what you can afford to pay to your creditors while leaving you  with sufficient income to maintain a reasonable standard of living.

The PIA can include things such as writing down mortgage debts , writing down unsecured debts. You cannot be forced to sell your home as part of the arrangement.

If  you consent to the proposal –  the PIP then summons a creditors’ meeting to vote on the proposal. In considering whether to vote in favour of the proposal, the creditors take into account whether the financial outcome for them under the PIA is likely to be better than the estimated financial outcome for them in alternative scenarios such as enforcement or bankruptcy.

The arrangement is accepted if creditors representing 65% of the value of the total debt (secured and unsecured) vote in favour and if more than 50% of the secured creditors and 50% of the unsecured creditors vote in favour.

If your financial circumstances improve over the course of the PIA  you are obliged to notify the PIP and the  terms of the PIA may be varied to provide for increased payments to the creditors.

If  you don’t  abide by the terms of the PIA (e.g. there is a 6 month arrears default in making the payments due under the PIA) the arrangement will fail and you  will again be liable in full for the debts. The creditors can then take enforcement action against you  or petition for your bankruptcy.

If you  successfully complete the PIA, all of your  unsecured debts  are discharged.  You will remain liable to pay the mortgage in respect of his principal private residence on the restructured terms agreed under the PIA.

 

 

Jobs at The Insolvency Service of Ireland

Alan Shatter T.D, Minister for Justice, Equality and Defence, has announced the commencement of  recruitment of some  of the specialist staff required by  the Insolvency Service of Ireland (ISI).

U up to 80 staff, including some specialist staff, may be required initially  for the Service itself. It is expected that they will be mainly sourced through redeployment from other areas within the public service.

Arrangements are also being made for the transfer of the functions, in regard to the administration of bankruptcy currently carried out by the Courts Service to the new Insolvency Service.

A number of specialist staff will be required, on either short and long-term contracts. To start this process, and to ensure that the Service will be in a position to discharge its functions early in 2013, the Government has agreed that a recruitment process for a number of accountants and an in-house solicitor, should commence immediately.

Where suitable staff cannot be sourced from redeployment from across the public sector, they will be recruited through an open process organised by the Public Appointments Service.

Considerable emphasis is being placed on developing the Information and Communications Technology aspects of the new Service, with priority attention being devoted to the design and development of the necessary case management, financial management and management information systems. The process of identifying and securing an appropriate office premises for the new Service is also underway.

Minister Shatter said ““I am keen that the new Insolvency Service will be in a position to open for business as soon as possible after the necessary legislation is passed by the Oireachtas. This approval by Government of the staffing resources necessary is a key step and I look forward to speedy progress over the coming months.”

Appointment of the Director of the Insolvency Service of Ireland.

The Minister for Justice and Equality, Mr Alan Shatter, T.D., today announced that he has appointed Mr Lorcan O’Connor to be the Director-designate of the Insolvency Service of Ireland. He will take up his post on 22 October, 2012.

The salary for the position of Director-designate of the Insolvency Service of Ireland  is as follows  –  €127,796 – €133,605 – €139,898 – €146,191

 

The Insolvency Service of Ireland (ISI) is a statutory body which will be set up to  under the Personal Insolvency Bill . It is expected that the Report and Final Stage will be completed in the Dáil in October.

The ISI will be responsible for all matters concerning personal insolvency, both judicial and non-judicial. Its main functions will be to provide and manage the processes necessary for the efficient operation of the new non-judicial debt settlement procedures being developed under the legislation; to determine applications for debt relief under the proposed Debt Relief Certificate process; to further develop insolvency policy and legislation; to develop guidelines for insolvency procedures; to provide necessary information to both the public and practitioners; and to develop and maintain appropriate statistics in regard to insolvency.

 

Mr O’Connor   is a Chartered Accountant and Business & Legal Studies graduate of UCD. He  has almost 15 years’ experience in the area of insolvency. He is a Council member and Treasurer of the Irish Society of Insolvency Practitioners. Between 2006 and 2008 he was seconded to the Department of Transport as the Department’s Financial Adviser.

Minister Shatter said, “I am delighted that Lorcan has accepted the appointment. As Director he will be the key driver of the delivery of the reform and will be required to bring together all of the critical elements – legislative and organisational – so as to ensure coherence in the ultimate development of the Service. He brings to the position a wealth of experience that equips him ideally for the many challenges that lie ahead.”

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.