Category Archives: Personal Insolvency Trustee

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.

 

Personal Insolvency Practitioners Ireland

To get a  Debt Settlement Arrangement or a Personal Insolvency Arrangement, you must apply through a Personal Insolvency Practitioner (PIP).

The Insolvency Service of Ireland will be responsible for licensing  Personal Insolvency Practitioners.
The Jstice Minister has said that  the ” Insolvency Service will not impose any particular restrictions on the type of professions of persons who will be licensed to be a PIP.”

The Insolvency Service will set up and maintain a Register of Personal Insolvency Practitioners.

Personal Insolvency Practitioners will need to have  a policy of professional indemnity insurance .

In other countries such as the UK or US  insolvency practitioners tend to be accountants or lawyers, but can also be other professionals in the broad financial services sectors.  In the UK – one of the main requirements is that individuals must pass an examination – the Joint Insolvency Examination .

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.