As we continue our New Years Legal resolutions for 2020, one issue which people may feel forced to face is debt.
With a New Year comes a resolve to clean the slate and start afresh, but it is often difficult to face the burden of debt and to know where or who to turn to.
How does Insolvency work?
Being burdened with debt is an extremely stressful time.
The Insolvency code is a mechanism by which people can come to realistic arrangements to tackle debt and return to solvency.
The first port of call for those who are insolvent – cannot meet their debts as they fall due – is to contact a Personal Insolvency Practitioner (PIP). A PIP will assess their situation and advise on which arrangement, if any, would be suitable.
The PIP acts as a go- between for the debtor, the creditors, the Insolvency Service and the Courts.
The second action people must take is to gather all information. For everyone involved it is essential that a firm grasp is had on the current situation to properly advise and take up the right course of action.
One of the cornerstones of the application for Insolvency is the Prescribed Financial Statement (PFS). The purpose of the PFS is to give an accurate written account of all assets, debts, income and expenditure so that a true reflection of the financial position of the person seeking relief is outlined. This will enable the PIP to recommend different options for dealing with outstanding debts and to recommend which arrangement, if any, would be suitable.
The PFS would form the basis of calculating what repayments will be made to creditors and what portion of monies can be kept to maintain a reasonable standard of living.
The statement will contain a Statutory Declaration which must be signed by the applicant and witnessed by a Notary public, Commissioner for Oaths, Peace Commissioner or a practicing Solicitor. It will be an offence to sign this declaration without full disclosure or if any of the details in the Prescribed Financial Statement are incorrect or misleading.
A considerable amount of work can be involved in preparing the PFS and vouchers or receipts for all of the details provided will be required.
How Much Income Do I Have Or Need To Have ?
Initially there was much debate about the minimum standard of living that people entering into insolvency arrangements are entitled to.
I have found that many clients who I have been dealing with were living below the reasonable standard of living.
However, there are many situations where people have assets and with the proper arrangement, solvency can be achieved.
Furthermore with the reduction of application fees for arrangements, it is now less costly than ever before to avail of the opportunity to be debt free.
Are Insolvency Arrangements Dealt With In The Courts?
Insolvency cases go before Circuit court judges who are specially appointed to deal with them.
With the abolition of the absolute veto by the Banks where the family home was involved , there has been more involvement by the courts.
It remains the case that an Arrangment must be presented that is fair to all parties before it can be approved by the Courts.
I Want To Deal With My Debt. What Should I Expect From a Personal Insolvency Practitioner?
One of the first things a PIP will do is get a Protective Certificate for those who are struggling financially. This would stop any creditors pursuing them for a limited amount of time to allow time for proposals and negotiations.
Personal Insolvency Practitioners will:
- Help those who are looking for relief under the Act in preparing a detailed financial statement.
- Use this information to advise on what debts can be included and put together proposals based on the individual circumstances.
- Submit proposals to their creditors once the various options and consequences are discussed.
- Liaise with the creditors to try to find a solution which all parties can agree on.
- Organise a meeting of creditors to vote on the proposals.
- Organise the approval of any agreed Arrangement with the courts and the registration with the Insolvency Service of Ireland.
A detailed plan will be given to those availing of relief under the Act setting out their obligations and specifying the time frame within which these obligations are to be met. The practitioner will also be responsible for monitoring the payment arrangements for their duration.
The material contained in this blog is provided for general information purposes only and does not amount to legal or other professional advice. While every care has been taken in the preparation of the information, we advise you to seek specific advice from us about any legal decision or course of action.