Today the Insolvency Service of Ireland (ISI) opened its doors for business. This means that indebted individuals can call the ISI and make arrangements on their personal financial situation by reviewing a series of options.
Almost 100,000 mortgage accounts have run into difficulty since Ireland’s economic crash began five years ago.
BDO Limerick has put together some frequently asked questions around insolvency for your information.
What is ISI?
The Personal Insolvency Act 2012 came into force in the dying days of 2012. The Oireachtas made some significant changes in the final stages of the Bill relating to the position around:
- Excluded and excludable debts
- Reasonable expenses of the debtor
The Act provides for the establishment of the Insolvency Service of Ireland (ISI).
What does insolvency mean?
There are four main outcomes possible when using the provisions of the Act, and the applicability of each depends on the circumstances. The four are:
- Debt Relief Notice
- Debt Settlement Arrangements
- Personal Insolvency Arrangements
What is a Debt Relief Notice?
A Debt Relief Notice (DRN) is a notice issued to debtors who have accumulated debts of €20,000 or less and who have limited assets and limited income.
What is a Debt Settlement Arrangement?
A Debt Settlement Arrangement (DSA) is applicable to debtors who owe amounts only in respect of unsecured debts. The DSA process allows for the appointment of a Personal Insolvency Practitioner (PIP) who processes an application to the ISI for a protective certificate. The protective certificate lasts for a period of 70 days and the DSA is enforced for a period of typically up to 60 months (exceptionally extendable for up to 72 months). If 65% or more of the creditors approve the proposals of the PIP, then it is brought back to the ISI, who will place it before the appropriate Court. If approved, the arrangement is binding on all creditors including those who voted against the arrangement itself.
What is a Personal Insolvency Arrangement?
A Personal Insolvency Arrangement (PIA) is applicable where the debtor is insolvent and where there is no prospect of solvency within 5 years. It applies where there is both secured and unsecured creditors. The value of the secured creditors must be €3 million or less. Similar processes apply to the DSA. Overall 65% of the creditors must approve the arrangement at creditors meetings, and additionally, in excess of 50% of the creditors of both secured and unsecured creditors must approve the arrangement. There are procedures which ensure the value of secured assets are written down to their fair market value. There is a worry that secured creditors with their own class, and a requirement for a 50% majority of that class that they may veto arrangements. This may happen, but the process does have some safeguards for secured creditors and they be better off than in a bankruptcy situation.
When will I be discharged from bankruptcy?
The position in relation to bankruptcy is that the length of period for automatic discharge has been reduced from 12 to 3 years.
Log onto the Insolvency Service of Ireland http://www.isi.gov.ie