The recently announced Personal Insolvency Bill (P.I.B) is expected to be enacted in law by the end of this year. The Bill provides for 3 methods of dealing with debt, for those who are seriously in arrears. The operation of all 3 Schemes will be overseen by a new state body, i.e. The Insolvency Service.
Outlined below are details on how each scheme will operate:
Debt Relief Notice (DRN)
Suitable for Unsecured Debt under €20,000.
Features of Scheme:
- To qualify under this scheme the debtor must have total assets under €400 and a disposable weekly income of less then €60. In addition the value of any vehicle they own cannot be more than €1,200.
- Applicants must not have incurred more than 25% of their debt within the previous 6 months.
- Applicants must show that they are not in a position to meet their debts and reside (or have been resident within the last 12 months) inIreland.
Certification Process:
- Applicants must appoint a Debt Advisor, which is likely to be MABS.
- They must complete a detailed financial statement of their circumstances.
- The Advisor will then apply to The Insolvency Service for certification of their application.
- If approved, The Insolvency Service will issue a certificate and apply to the courts for a Debt Relief Notice (DRN).
Action Plan:
- The DRN will state the individual’s creditors, who are then precluded from taking any action against them for a period of up to 36 months.
- At the end of this period, if the individual can show that their financial circumstances have not improved, then they will be free from all debts specified in the DRN.
- During the 36 month period, if the debtor receives a gift or payment for more than €500 then 50% of this must be shared with their creditors.
- Only one DRN can be applied for in a lifetime and if a debtor applies for credit of more than €650 during this period, they must make it known on any application.
Debt Settlement Agreement (DSA)
Suitable for Unsecure Debt in excess of €20,000.
Features of Scheme:
- This Scheme is suitable for applicants who have some net income and assets, but are insolvent, and as a result cannot meet their commitments.
- The DSA allows individuals to repay some debt over a 5 year period, including mortgage debt.
- Applicants must show that they have been resident inIrelandwithin the last 12 months.
Certification Process:
- Applicants must appoint a Personal Insolvency Practitioner (PIP) who will advise and manage the process. The PIP applies to the Insolvency Service for certification on behalf of the applicant.
- Once the Insolvency Service issues a certificate, application is made to the courts for a Protective Certificate, which provides for a 70 day standstill period from creditors.
- The PIP then arranges a creditors meeting and presents the Debt Settlement Agreement (DSA) for approval. For the DSA to proceed, a minimum of 65% of creditors must agree to it.
- The person acting as a PIP will have an ongoing responsibility to manage the DSA and their fees will have to be agreed between the applicant and the lenders concerned.
Action Plan:
- The DSA will provide a range of schemes which will propose a repayment schedule over a period of 5 years, depending on the applicant’s circumstances.
- It is likely each agreement will be different depending on the applicant’s circumstances and may also involve the sale of some personal assets.
- The agreement is legally binding and as a result creditors cannot take any legal action until the 5 year period is complete.
- The PIP will conduct an annual review of the debtor’s finances and may alter the agreement based on changes to the applicant’s financial circumstances.
- At the end of the period of 5 years the balance of their debt is written off.
- Only one DSA may be applied for per lifetime.
Personal Insolvency Arrangement (PIA)
Suitable for Secured and Unsecured debt up to €3million.
Features of Scheme:
- This Scheme applies to all secured and unsecured debt up to €3million spread across a number of creditors.
- Applicants are expected to have reasonable sums available to repay some of their debt.
- Prior to making any application, an individual must have already gone through the existing Mortgage Arrears Resolution Process (MARP) with their bank.
Certification Process:
- Applicants must appoint a Personal Insolvency Practitioner (PIP) who will advise and manage the process. The PIP applies to the Insolvency Service for certification for the applicant.
- Once the Insolvency Service issues a certificate, application is made to the courts for a Protective Certificate, which provides for a 70 day standstill period with creditors.
- The PIP then arranges a creditors meeting and presents the Personal Insolvency Arrangement (PIA) for approval. For the PIA to proceed, a minimum of 65% of creditors must agree to it.
- The person acting as a PIP will have an ongoing responsibility to manage the PIA and their fees will have to be agreed between the applicant and the lenders concerned.
Action Plan:
- The Personal Insolvency Arrangement (PIA) may involve a number of different arrangements with the applicant’s lenders, such as split mortgages, etc.
- Creditors can appeal or object to a PIA by lodging a notice with the courts.
- The arrangement is recorded in an Insolvency Register which is available for public inspection.
- An objective of this arrangement is to try to ensure that applicants do not have to forfeit their homes but in some cases this may form part of a PIA if their borrowings are excessive.
- At the end of the 6 year period that the PIA has been in place, the applicant is then discharged from the balance of their debts.
Note: Aside from these 3 new Schemes, the Bill provides for a dramatic overhaul of Irish Bankruptcy Law. A declared bankrupt will now be discharged from their debts after a 3 year period rather than 12 years previously.
