Debt Relief Notices
A Debt Relief Notice (DRN) is one of 3 debt resolution mechanisms introduced under the Personal Insolvency Act 2012 for people who cannot afford to pay their personal debts. These arrangements offer different solutions to people in different situations.
The Debt Relief Notice is designed for people who have very low disposable income or assets. It allows for the write-off of qualifying debt up to a certain limit, subject to a 3-year supervision period. This upper limit was originally €20,000. Under the Personal Insolvency (Amendment) Act 2015 the limit has increased to €35,000 with effect from 29 September 2015.
This document describes how to qualify for a DRN and how the process works.
The Insolvency Service of Ireland has published information about Debt Relief Notices, including FAQs, a guidebook and a set of possible scenarios. It also provides extra information on DRNs, including a quick guide (pdf) on its website backontrack.ie, aimed at people who are struggling with debt.
You can read a general overview of personal insolvency options here.
Am I eligible?
A Debt Relief Notice deals with qualifying debts of up to €35,000 in the case of people who have very low disposable income or assets and no prospect of being able to pay off their debts in the next 3 years. (As noted above, this upper limit has recently increased from €20,000.)
You can only avail of a DRN once in your lifetime. You cannot get a DRN if you are involved in one of the other new debt resolution processes, or in the bankruptcy process, or if you have completed such a process within the last 5 years.
In general, you will only qualify for a DRN if all of your debts are unsecured (apart from exceptional cases, outlined below) and if the total of your debt to all your creditors adds up to €35,000 or less. (Under the Personal Insolvency (Amendment) Act 2015, this limit was increased from €20,000 with effect from 29 September 2015.)
A Debt Relief Notice is mainly designed to cover unsecured debts (though it can include some secured debts – see below) so it is important to know whether your debts are secured or not.
In general, debts such as the following are unsecured:
- Utility bill arrears (gas, electricity etc.)
- Rent arrears
- Credit card debt
- Store card debt
- Bank overdrafts
- Unsecured bank loans
However, if they are rolled up into your mortgage, they become secured loans.
A secured debt is a loan on which property or goods are available as security against non-payment. Mortgages and car loans are the most common secured loans. (If you have this type of debt, you cannot get a DRN but you may apply for another personal insolvency option.)
However, while a DRN will not cover mortgages or similar large-scale secured debt, in certain exceptional cases a loan may be secured against a small item of property, such as a ring. Such a secured debt can be included in a DRN, but only if the creditor agrees.
Excluded and excludable debts
The Personal Insolvency Act 2012 specifies certain types of debt that cannot be written off by a Debt Relief Notice. These are called excluded debts.
The Act specifies certain other types of debt to be excludable from a DRN. This means that they can only be covered by the DRN if the creditor is asked and agrees to let them be included – in which case they become permitted debts – debts that the creditor permits to be covered. Most types of excludable debts are those owed to the State.
The types of debt that are excluded are:
- Debts under family law orders, such as maintenance orders for spouses and children
- Debts due under court awards for personal injury or death
- Debts arising from a loan (or forbearance of a loan) obtained through fraud or similar wrongdoing
- Debts arising under court orders made under the Proceeds of Crime Acts or fines imposed by the courts for criminal offences
The types of debt that are excludable are:
- Taxes, duties or levies owed to the State, such as income tax, the Local Property Tax, VAT, capital taxes
- Service charges owed to local authorities
- Household Charge
- Money owed under the Nursing Homes Support Scheme (in respect of a loan advanced by the HSE to a nursing home resident to cover the amount due from the principal private residence)
- Money owed to the Department of Social Protection
- Debts due to owners’ management companies in respect of annual service charges or contributions due for multi-unit developments (this is the only non-State debt in this category)
Income and asset tests
All of your income will be taken into account, except for Child Benefit. Any assets that you have will also be valued.
You will only qualify for a DRN if, after deducting certain outgoings, you would be left with a net monthly disposable income of €60 or less. The 2 types of outgoings are:
- Payments in respect of debts that are outside the DRN process – these are either excluded debts that cannot be covered, or excludable debts that the creditor has not agreed to include, as outlined above
- Reasonable living expenses, which will be assessed in accordance with detailed guidelines – see below
Your net disposable income takes account of your income from salary, wages, pensions and contributions from other household members. Any other income available to you is also taken into account – including all social welfare payments except Child Benefit.
Deductions are then made for:
- Income tax, PRSI and other charges/levies on income (such as Universal Social Charge)
- Payments that you make in respect of excluded debts and excludable debts (unless they are permitted debts – see ‘Excluded and excludable debts’ above)
- Reasonable living expenses - see below
The total value of your assets must be €400 or less. They are assessed at market value and include savings, shares and property. The following assets are not taken into account:
- Essential household equipment and appliances and books, tools or equipment needed for employment or business, up to a total value of €6,000
- Books or equipment that are reasonably necessary to enable you or a dependant to participate in and complete a course of education (at primary or secondary level only)
- A vehicle that has been adapted for a person with a disability (either you or one of your dependants)
- A motor vehicle up to a value of €2,000 *
- One item of personal jewellery to a maximum value of €750 *
- Any future pension entitlement or option that you cannot choose to access at present
* A motor vehicle or piece of jewellery cannot be excluded from the asset test if the cost of buying it forms part of your qualifying debts.
Reasonable standard of living/living expenses
You must be left with enough income to maintain a reasonable standard of living for yourself and your dependants.
The Insolvency Service of Ireland (ISI) is responsible for drawing up guidelines on what constitutes a reasonable standard of living and reasonable living expenses. The guidelines provide examples of what may and may not be allowed as reasonable living expenses. They are reviewed every year.
You can use the ISI's reasonable living expenses calculator to find out what your household's monthly expenses would be assessed at.
How does a Debt Relief Notice work?
Effects on debtors
If a DRN is issued for you, it will allow for the write-off of your qualifying debt up to €35,000 (formerly €20,000) subject to a 3-year supervision period. You will still be liable for any excluded debts and for any excludable debts that your creditors have not agreed to include in the DRN - see ‘Excluded and excludable debts’ above.
During the supervision period, you may not get credit of €650 or more from any source, either on your own or as part of a joint application with someone else, without informing that source that you have a Debt Relief Notice.
You will have to tell the Insolvency Service of any change in your circumstances, for example, any increases in income, assets or liabilities. If your financial position improves above certain limits, you will have to repay part of your debts – see ‘Paying part of your debts’ below.
You will also have to tell the ISI if you become aware of any errors or omissions in the documentation included in your application for the DRN. The ISI has extensive powers of investigation of anything that it considers relevant to your case.
The Circuit Court may extend the supervision period in certain circumstances – see ‘Extension or unsuccessful ending of a DRN’ below.
Details of your DRN will be placed on a public Register of Debt Relief Notices.
Effects on creditors
The issue of the DRN will be the first official notification to your creditors that you have applied to have your debts written off – except for creditors with excludable debts, who will have to be consulted about having their debts included as permitted debts. Your other creditors can object on certain specified grounds when they receive the DRN – see ‘Objections’ below.
During the supervision period, your creditors will not be allowed to pursue any action against you for the recovery of debts covered by the DRN. This means that your creditors may not:
- Initiate or prosecute legal proceedings or
- Seek to recover payment for a debt or recover goods or
- Execute or enforce a judgment in respect of a debt
- Contact you
However, if any of your debts were guaranteed by another person, the creditor may take action against that person.
Any of your creditors may apply to the Circuit Court if they object to the inclusion of the debts you owe them in the Debt Relief Notice.
They can only object on the following grounds:
- You do not meet the eligibility conditions for a DRN
- Inaccuracies in the documentation on which your application was based
- You have failed to inform the Insolvency Service of changed circumstances or failed to surrender extra income as required
- You are an undischarged bankrupt
- You have committed an offence under the Personal Insolvency legislation since the DRN came into effect
- The procedural requirements were not followed
- In the 6 months before applying for the DRN, you had arranged your financial affairs primarily with a view to becoming eligible for a DRN
The Court has the power to make various decisions, including extension or termination of the DRN. The ISI may apply to the Court for withdrawal of the notice on similar grounds and with similar consequences – see ‘Extension or unsuccessful ending of a DRN’ below.
Paying part of your debts
If your financial situation improves to a certain extent during the 3-year supervision period, you will have to repay part of your debts.
- If you get a gift or windfall payment worth €500 or more, you must surrender half of it to the Insolvency Service
- If your net income (after tax, PRSI and Universal Social Charge) increases by €400 or more per month, you must surrender half of that increase to the ISI as well
Any amounts surrendered to the Insolvency Service will be distributed to the relevant creditors in proportion to the size of the debts that you owe to each creditor.
If you manage to repay half of the total debts covered by the Debt Relief Notice, then you no longer have to pay any further money and the DRN will end successfully.
Debt Relief Certificate
At the end of the supervision period (or if you have managed to pay 50% or more of your debts) the Debt Relief Notice will cease to have effect. You will be discharged from the debts it covered and any interest or penalties on those debts. All of the information about your DRN will be removed from the public Register of Debt Relief Notices and you will be given a Debt Relief Certificate, confirming that you have been discharged from the relevant debts. The ISI will also write to all the creditors concerned, to tell them that the Debt Relief Notice has been removed from the Register.
Extension or unsuccessful ending of a DRN
In certain circumstances, the Debt Relief Notice may be amended or terminated, enforcement orders may be issued, or the supervision period may be extended. The main situations in which this can happen are:
- If the ISI concludes that you have failed to disclose an improvement in your financial position during the supervision period, the Circuit Court can make an order for enforcement, extend the period of the DRN, amend the DRN or make other orders or directions.
- If you or one of your creditors are aggrieved by something the Insolvency Service has done (or not done) and apply to the Circuit Court, the court may decide to revoke a decision of the ISI or make an order as above.
- If it turns out that you have given incomplete or false information, were not originally eligible for a DRN, have failed to surrender money to the ISI (50% of increased income or lump sum) or are otherwise in breach of your DRN obligations, the court can make orders as above or can decide to terminate the DRN.
- The DRN can also be terminated if, in the 6 months before applying for it, you had arranged your financial affairs primarily with a view to becoming eligible for a DRN
If your Debt Relief Notice is terminated by the Court, you will be liable to pay all the unpaid debts that it had covered (unless the Court orders otherwise) along with any arrears, charges and interest that built up during the supervision period.
How do I get a Debt Relief Notice?
You must apply through an Approved Intermediary (AI) – see How to apply below.
You must disclose all details of your financial affairs to the AI, who will then advise you whether or not you meet the conditions for a DRN, the consequences, and any alternative options.
If you decide go ahead and apply for a DRN, you must confirm your intention in writing.
You will have to complete a Prescribed Financial Statement (PFS), giving full and honest information about your financial circumstances. You must act in good faith and co-operate fully with the process.
You will have to allow access to certain personal data held by banks and other financial institutions so that your financial situation can be verified. Government departments and agencies will have the power to release certain information about you.
The AI will help you to complete the Prescribed Financial Statement and will then process your application if they consider that:
- You meet the eligibility conditions
- The information in your PFS is complete and accurate in all material respects - you must confirm this by making a statutory declaration **
** A statutory declaration is a solemn statement which must be signed in the presence of someone who is authorised to witness statutory declarations – such as a practising solicitor, a Peace Commissioner, a notary public or a Commissioner for Oaths.
A fee of €100 was payable to the ISI for applying for a DRN.
When the AI is satisfied that you are eligible for a Debt Relief Notice and that all the information you have provided is complete and accurate, they will sign a statement saying so. The AI will then transmit your application, including all the details of your financial affairs and your debts, to the Insolvency Service to have a DRN approved.
When considering your application, the Insolvency Service can ask the AI for further information and will also have power to enquire into anything it considers relevant to verify the completeness and accuracy of your application. It can request information about your bank accounts, assets, liabilities, employment and income, and the Act states that anyone asked for such information (your bank, employer etc.) “shall furnish the information requested as soon as practicable”.
Government departments, the Revenue Commissioners and other State bodies can also provide relevant information to the ISI about your financial circumstances.
If the ISI considers that the application is in order, it will issue a certificate to that effect and notify the Circuit Court. The court will review the application and documentation and, if satisfied that the conditions are met, will issue a Debt Relief Notice.
The Court will notify the Insolvency Service, the AI, yourself and the relevant creditor(s) of the DRN. The DRN will relate to specific debts and specific creditors. You may well have other debts that are not covered by the DRN and those creditors are not affected by it. The Insolvency Service will publish details of the DRN on the Register of Debt Relief Notices, which is accessible to the public.
How to apply
Your application for a Debt Relief Notice must be made through an Approved Intermediary (AI). You can choose an AI from the Register of Approved Intermediaries that is published by the ISI. The majority of Money Advice and Budgeting Services (MABS) have been authorised as AIs. The MABS Helpline provides an initial checking service to check if you satisfy the eligibility criteria for a DRN.
Before contacting the MABS Helpline for this eligibility check, you will need to assemble all the relevant information about your debts, assets, income and circumstances. The MABS Helpline is at 0761 07 2000, Monday to Friday from 9 am to 8 pm.
Read more on the MABS website.
Further information is available from the ISI’s helpline 0761 06 4200 (Monday to Friday, 9 am to 6 pm) and from its main website isi.gov.ie, as well as its website backontrack.ie for people who are struggling with debt.