Personal Insolvency ExplainedInsolvency Schemes | Debt Relief Notice | Debt Settlement Arrangement | Personal Insolvency Arrangement | The Process | FAQ
Insolvency is the inability of a debtor to pay their debt. Previously under Irish law, bankruptcy was the only formal method for insolvent debtors to settle their debts. The Personal Insolvency Act 2012 set up three new schemes to give debtors and their creditors options based on the individual situation of the debtor. It also decreased the term of bankruptcy from twelve years to three.
Two of the new arrangements (Debt Relief Notice and Debt Settlement Arrangement) are set up for debtors with only unsecured debts, such as utility bills, credit card debts and personal loans. The other (Personal Insolvency Arrangement) is set up for debtors with both unsecured debts and secured debts, such as mortgages or car loans. While most types of debt are eligible for inclusion under one of the new schemes, some exclusions exist, such as court fines in relation to criminal offences.
The New Insolvency Schemes
Below you can find details on the three schemes which may help you with your debt payments. You may avail one of those schemes based on the following criteria:
- How much you owe
- The type of debt
- Your income
- Your assets
|Level/Type of Debt||Income||Assets||Required Intermediary|
|Debt Relief Note||Under €20,000||Under €60 per month*||Max. €400||Approved Intermediary|
|Debt Settlement Arrangement||Unsecured only||No Max.||No Max.||Personal Insolvency Practitioner|
|Personal Insolvency Arrangement||Secured** and unsecured||No Max.||No Max.||Personal Insolvency Practitioner|
* after Reasonable Living Expenses are deducted
** Subject to a cap of 3 million, unless creditors consent to a higher level.
Debt Relief Notice
A Debt Relief Notice (DRN) allows a significant write off of debts for a debtor whose debts are unsecured and total less than €20,000 who has very limited income and assets and no prospect of being able to repay the debts over the next three years. An application for a Debt Relief Notice must be made through an Approved Intermediary, so if you think you need a DRN, you should contact MABS directly.
Debt Settlement Arrangement
For debtors with only unsecured debts which total more than €20,000, a Debt Settlement Arrangement (DSA) enables a debtor to make payments agreed with their creditors with any remaining eligible debt being discharged following completion of the period of the DSA. A DSA lasts for 5 years, and during that time creditors may not take additional action to recover the debt.
Personal Insolvency Arrangement
Under a Personal Insolvency Arrangement (PIA), a debtor’s eligible unsecured debts will be settled over a period of up to 6 years, and secured debts may be settled or restructured.
The Process (DSA & PIA)
(Debt Settlement Arrangements & Personal Insolvency Arrangements)
Once a PIP has been appointed, the debtor completes a Financial Statement with the help of the PIP and agrees to disclose all relevant information so that an arrangement can be reached. Once the Insolvency Service has received and processed the complete application, the court will review the documentation and will issue a protective certificate if everything is in order. The protective certificate gives the debtor 70 days protection from creditors while the PIP negotiates an arrangement between the debtor and the creditors.
If there are no objections to the agreement, the arrangement will be approved by the court, and the Insolvency Service will record it in the Register of Debt Settlement Arrangements or the Register of Personal Insolvency Arrangements as appropriate. If the arrangement is successfully completed, the completion will be recorded in the Register and the remaining debt covered by the arrangement will be discharged. In the case of PIAs, secured debts will not be discharged except where it is explicitly agreed as part of the arrangement.
Full details on the debt resolution schemes and the insolvency process are available from the Insolvency Service of Ireland.
Frequently Asked Questions about Personal Insolvency in Ireland
Can I keep my home if I enter one of the new personal insolvency schemes?
The Personal Insolvency Act does not require the sale of principal private residences; however, in some cases, if you wish to move or if the cost of remaining in that residence is disproportionately high, the arrangement may provide for such a move.
Will entering an arrangement affect my employment?
The Personal Insolvency Act does not require that a person’s employment be affected by entering an arrangement; however, certain professions may be governed by bodies where members’ personal finances are subject to regulatory requirements.
Can I obtain credit while subject to an arrangement?
If you seek to obtain credit of more than €650 during the period of an arrangement, you must inform the creditor that you are subject to that arrangement. Lenders have the right to take into account a debtor’s credit history in assessing a credit application, so it may be more difficult to get credit when an arrangement is in place.
How will I know that my Personal Insolvency Practitioner is qualified?
The Insolvency Service has set a number of requirements for individuals wishing to become PIPs. They must hold a qualification in law, business, finance or another appropriate qualification and meet standards for tax compliance and fitness and probity. They also must hold professional indemnity insurance and pass an exam on Personal Insolvency law. A list of all registered PIPs is available on the Insolvency Service website.
In addition, all PIPs listed on Findapip.ie are members of the PIPx network, which facilitates compliance with Insolvency Service regulations.
What fees can a PIP charge?
The fees a PIP can charge are not set out directly in the law and can vary depending on the type, size and complexity of the arrangement. The PIP must inform the client of the expected level of fees at the beginning of the process.
The Insolvency Service charges a set fee to process an application. These fees are set out below:
- €100 for a Debt Relief Notice
- €250 for a Debt Settlement Arrangement
- €500 for a Personal Insolvency Arrangement
If I enter an arrangement, where will my details be published?
The Insolvency Service of Ireland will maintain a publically available register for each type of arrangement as well as a register of Protective Certificates issued. When an arrangement is successfully completed, details of that arrangement will be removed from the register within three months.
Bankruptcy details will continue to be available through the Courts.