The Personal Insolvency Act 2012 introduced new measures to assist those with mortgage arrears or other debt. We are hosting a series of free “Personal Insolvency and Bankruptcy” seminars in Tipperary, Kilkenny, Portlaoise, Waterford, Cork and Limerick in June and July. Those who attend the seminars will have the opportunity to learn about the Act and how it will work in practice in terms of relief options for those with mortgage arrears and other debt.
Under the new Act there are a number of options available to those in difficulty with debt:
Debt Settlement Arrangement – (DSA)
This option covers loans with two or more creditors in the amount of €20,000 or more. The borrower will have to pay off a certain amount for up to 5 years and the balance may possibly then be written off.
A DSA allows for settlement of unsecured debt; secured debt is unaffected.
It is a once in a lifetime option and may be proposed by a debtor to one or more creditors for the settlement of unsecured debts.
The debtor must be insolvent and meet certain eligibility criteria. The option cannot be availed of if 25% or more of the debts in question arise within 6 months of the application.
The debtor must provide a written statement of his financial affairs to an Insolvency Practitioner who manages any proposals to creditors.
The Insolvency Service will, if it is satisfied that the application is in order, issue a certificate to that effect and forward this to the courts who can then issue a protective certificate (lasting 70 days with provision for extension). This then limits further enforcement for that period. The Insolvency Practitioner must then notifies the relevant creditors, and invites submissions as to how the debts might be dealt with.
At a meeting, Creditors who hold not less than 65% in value of the debts due must approve the DSA.
If the DSA is approved by the court it takes effect once registered by the Insolvency Service in the Register of Debt Settlement Arrangements. It lasts for 5 years (with a possibility of an extra year) with the debtor discharged after this time.
Personal Insolvency Arrangement – (PIA)
This option will apply specifically to mortgage holders and those with secured and unsecured debts of €20,000 to €3 million (at least one creditor must be secured). The process is similar in that the Insolvency Practitioner will make the application after the financial statement has been completed and 65% of the lenders again must be in agreement for some of the debt to be written down. A protective certificate also issues here if all is in order and the Insolvency Practitioner must then notify the relevant creditors of the issue of the protective certificate and the proposed PIA, seek creditor submissions and provide them with certain documents.
Again, those who avail of a Personal Insolvency Arrangement can only do so once.
Specific provisions are included which are designed to ensure that a minimum amount is payable to secured creditors and that any write-down does not reduce the amount to be paid to the secured creditor on the sale of the property below the lesser of the value of the security or the amount of the debt secured thereby. It also provides for revision if the property is subsequently sold for an amount greater than the written-down value of the debt it secured, unless agreed otherwise.
All secured debts (except family homes) are treated the same.
It is hoped that the first applications under the new legislation will be made in the coming months and so it is beneficial to begin the preparatory work needed to do so at this stage. The old addage of first in – first out applies however and with that in mind the sooner these options are explored and used the sooner those who avail of them will be released from their debt and will find themselves able to prosper again.