Personal Insolvency & Bankruptcy
If you are facing Personal financial difficulties our team of personal insolvency specialists can provide timely and invaluable support to help you stabilise your financial situation. View our website mulhernleonarddebtsolutions.ie
Sean Mulhern F.C.A. is authorised by the Insolvency Service of Ireland as a Personal Insolvency Practitioner (PIP) in Sligo and covers the surrounding counties of Roscommon, Mayo, Leitrim, Donegal and Longford.
Debt is categorised as either secured or unsecured. Secured debt is where creditors typically hold security over property or other assets. The most common secured debt is a mortgage over property held by a lending institution. Unsecured debt, as the name suggests is debt where the creditors hold no security.
If you are unable to pay your debts and do not see yourself being able to do so in the next few years, there are 3 debt resolution mechanisms which may help you.
The debt resolution mechanisms are as follows:
- Debt Relief Notice (DRN)
- Debt Settlement Arrangement (DSA)
- Personal Insolvency Arrangement (PIA)
The Insolvency Service of Ireland (ISI) administers these debt resolution processes and authorises Approved Intermediaries and Personal Insolvency Practitioners (www.ISI.gov.ie). To help explain some of the concepts contained in the legislation, the ISI have created some possible scenarios to illustrate how the scheme may operate and these can be found on their website.
Which option is right for you will depend on:
- how much you owe
- the type of debt
- your income, and
- your assets
Our team of professionals can advise on:
- Informal Voluntary Arrangement with unsecured creditors
- Negotiating terms with secured creditors (lending institutions)
- Debt Settlement Arrangements (DSA).
- Personal Insolvency Arrangements (PIA).
Debt Relief Notice (DRN)
which allows for the write off of debt up to €20,000 subject to a three year supervision period. DRN applications are administered via an Approved Intermediary (AI). A register of AIs is contained at www.ISI.gov.ie. A PIP cannot make an application for a DRN.
Debt Settlement Arrangement (DSA)
which allows for the write off of unsecured debt. There is no limit on the amount of unsecured debt which can be covered by a DSA which can include personal loans, credit cards, trade creditors (for a sole trader) and business loans. A DSA cannot include secured debt. You must process your application through a Personal Insolvency Practitioner (PIP).
Personal Insolvency Arrangement (PIA)
which allows for the agreed settlement of secured debt and an unlimited amount of unsecured debt. A PIA is operated over a 6 year period but can be extended to 7 years. You must process your application through a Personal Insolvency Practitioner (PIP).
Under a PIA or a DSA you must be in a position to offer some repayments to creditors. This may take the form of:
1) agreeing to give part of your income over an agreed period and/or
2) agreeing to sell an asset (say land or a house) that is not mortgaged.
In a PIA, this offer must be accepted by 50% of your secured creditors and 50% of your unsecured creditors representing at least 65% of your overall debt. In a DSA, your offer must be accepted by at least 65% of the unsecured debts.
If you are successful in securing the acceptance of your creditors as specified in the arrangement you will be discharged from secured debts and unsecured debts. However, it is likely that payments to secured creditors i.e. banks, if substantial, will extend beyond the initial 6/7 year period.
The Personal Insolvency Act enlarges the list of “Acts of Bankruptcy” contained in the Bankruptcy Act 1988. It should be noted that an individual’s failure to adhere to the terms of a DSA or PIA may constitute an “Act of Bankruptcy”.
Bankruptcy is a process whereby all the assets/property of an individual who is unwilling or unable to pay their debts is transferred to an official of the High Court, the Official Assignee. The Official Assignee will administer the sale of these assets and distribute to creditors whatever funds remain, after first discharging costs, expenses, court fees and priority (preferential) debts. Bankruptcy proceedings are brought in the High Court. Subject to conditions, a debtor (i.e. person who is in debt) or a creditor or group of creditors can bring an application for bankruptcy. The Personal Insolvency Act 2012 made certain amendments to Bankruptcy Law which includes reducing the discharge period from 12 years to 1 year. In addition, it is a requirement that a debtor, when petitioning for adjudication against himself/herself will now be required to swear an affidavit that he/she has made reasonable efforts to reach an appropriate arrangement with creditors through a DSA or a PIA.
The bankruptcy procedure will apply to debt (both secured and unsecured) over €20,000. It will be the only option available in respect of secured debt of more than €3 million unless all secured creditors agree to increase that amount.
Summary of Mechanisms
|Arrangement||Type of debt covered||Value||Duration||Apply through|
|Debt Relief Notice (DRN)||Unsecured (and secured in certain cases)||up to €35,000||3 years||Approved Intermediary (AI)|
|Debt Settlement Notice (DSN)||Unsecured||no limit||5 years (+1)||Personal Insolvency Practitioner|
|Personal Insolvency Arrangement (PIA)||Unsecured and Secured||No liit on unsecured up to €3m secured (though cap can increase if agreed)||6 years (+1)||Personal Insolvency Practitioner|
|Bankruptcy||Unsecured and Secured||€20,000||1 year||High Court|