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Personal insolvency options

Introduction

Previously, if you were insolvent – that is, you were unable to pay your debts or meet your liabilities – bankruptcy was the only formal mechanism available for you to settle your debts and get protection from your creditors.

Three new debt resolution mechanisms were introduced under the Personal Insolvency Act 2012 for people who cannot afford to pay their personal and mortgage debts. The Insolvency Service of Ireland administers these debt resolution processes.

The rules on bankruptcy have also changed, with effect from 3 December 2013 and the Official Assignee in Bankruptcy is now based within the Insolvency Service. Read more in our document on bankruptcy

Statistics on the operation of all the above processes are published on the ISI’s website. The ISI also publishes details of the fees payable.

Personal Insolvency Act 2012

The Personal Insolvency Act 2012 became law in December 2012. The Act was amended by Part 7 of the Courts and Civil Law (Miscellaneous Provisions) Act 2013. A series of Statutory Instruments was made in order to bring the various sections into effect and implement the personal insolvency system. Further amendments were made by the Companies (Miscellaneous Provisions) Act 2013.

The Law Reform Commission has prepared a consolidation of the Personal Insolvency Act (pdf).

The Act introduced 3 new debt resolution mechanisms to help mortgage-holders and other people with unsustainable debt to reach agreements with their creditors. These mechanisms offer different solutions to people in different situations.

One important issue is whether your debts are secured or not. A secured debt is a loan on which property or goods are available as security against non-payment. Mortgages are the most common secured loans. In general, debts such as bank loans and credit card debt are unsecured, but if they are rolled up into your mortgage, they become secured loans.

The mechanisms introduced by the Personal Insolvency Act are:

  • A Debt Relief Notice (DRN) to allow for the write-off of debt (generally unsecured and in some cases secured) up to €20,000, subject to a 3-year supervision period
  • A Debt Settlement Arrangement (DSA) for the agreed settlement of unsecured debt, with no limit involved, normally over 5 years
  • A Personal Insolvency Arrangement (PIA) for the agreed settlement of secured debt up to €3 million (though this cap can be increased) and unsecured debt, with no limit involved, normally over 6 years

These mechanisms are described in more detail below.

The Act also introduced automatic discharge from bankruptcy, subject to certain conditions, after 3 years as opposed to 12 years previously. The relevant sections of the Act came into effect on 3 December 2013.

Mechanisms introduced by the Personal Insolvency Act

Each of these debt resolution mechanisms has its own rules and procedures but the following main rules apply to all of them:

Limits on usage

You can be involved in only one of the 3 mechanisms (DRN, DSA or PIA) or in the bankruptcy process at any one time. If you use one of these 4 processes, you will generally have to wait some years before applying to use another.

You may use each of the 3 mechanisms only once in your lifetime. (There is no such limit on bankruptcy but it would be rare for anyone to go bankrupt twice.)

Running up debts

You must not deliberately stop paying (or underpay) your creditors while these procedures are being set up as this may cause your application to be ineligible.

Provision of information

You will have to complete a Prescribed Financial Statement, giving full and honest information about your financial circumstances. The required information is specified in these Regulations (pdf). You will have to sign a Statutory Declaration to this effect. You must act in good faith and co-operate fully with the process.

You will have to give your written consent to the accessing of 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.

Public registers

If you use any of these 3 mechanisms, your name and details will be published on a register, which is accessible to the public. The success or failure of the process will also be recorded.

EU Insolvency Regulation

With effect from 9 July 2014, Regulation (EU) No.663/2014 (pdf) updated the Annexes to the Regulation on Insolvency Proceedings (EC) No 1346/2000 (pdf), which aims to simplify formalities governing the reciprocal recognition and enforcement of judgments in cross-border insolvency matters.

The updated Insolvency Regulation designates the DRN, DSA and PIA as insolvency proceedings which can benefit from cross-border recognition. This means that a debtor availing of a DRN, DSA or PIA will gain the same protection against creditors in most other EU countries that they receive in Ireland, subject to and in accordance with the Insolvency Regulation.

Read more in this press release.

Debt Relief Notice

The Debt Relief Notice (DRN) process provides debt relief for people who have virtually no disposable income or assets and no prospect of being able to pay off the debt in the next 3 years. If a DRN is issued for you, it will allow for the write-off of your qualifying debt up to €20,000, subject to a 3-year supervision period.

During this period your creditors will not be able to pursue you for payment, but if your circumstances improve during the 3 years, you may have to pay part of your debts accordingly. At the end of the 3 years, all of the debts covered by the DRN will be written off, even if you have not managed to pay anything off them.

How do you get a DRN?

Your application must be made through an Approved Intermediary (AI) – see How to apply below. This is a person or class of persons authorised by the ISI to support a debtor to make an application for a Debt Relief Notice.

Read more in our document on Debt Relief Notices (DRNs) and on the website of the Insolvency Service of Ireland.

Debt Settlement Arrangement

A Debt Settlement Arrangement (DSA) provides for the agreed settlement of unsecured debt with one or more creditors over a period of 5 years, with a possible agreed extension to 6 years. You may apply for a DSA if the level of your income, assets and debts would make you ineligible for a Debt Relief Notice. You must be able to make some repayments to your creditors in return for a discount of your debts. The DSA is a voluntary arrangement and it will have to get the support of creditors representing at least 65% of your total debt.

You must process your application through a Personal Insolvency Practitioner (PIP). This is a professional who is approved and registered by the Insolvency Service of Ireland to operate DSAs and Personal Insolvency Arrangements – see How to apply below.

When the agreed period ends, and if your DSA has operated successfully, you will be discharged from the debts that it covered.

Read more in our document on Debt Settlement Arrangements (DSAs) and on the website of the Insolvency Service of Ireland.

Personal Insolvency Arrangement

A Personal Insolvency Arrangement (PIA) provides for the agreed settlement of secured debt up to a limit of €3 million (although this cap may be increased with the consent of all secured creditors) and an unlimited amount of unsecured debt. A PIA will run over a period of 6 years, with a possible agreed extension to 7 years.

The PIA works like a Debt Settlement Arrangement in the following ways:

  • You must apply through a Personal Insolvency Practitioner (PIP) – see How to apply below
  • You must be able to make some repayments to your creditors in return for a discount of your debts
  • It is a voluntary arrangement and must get the support of creditors – both secured and unsecured – representing at least 65% of your total debt

In addition, over 50% of your secured creditors and 50% of unsecured creditors must vote in favour.

When the agreed period ends, and if your PIA has operated successfully, you will be discharged from the unsecured debts that it covered but the secured debt will only be discharged to the extent specified in the PIA.

Read more in our document on Personal Insolvency Arrangements (PIAs) and on the website of the Insolvency Service of Ireland.

Summary of mechanisms

Arrangement Type of debt covered Value Duration Apply through
Bankruptcy previously Unsecured and secured At least €1,900 (1 creditor) or €1,300 (combined creditors) 12 years High Court (voluntary declaration or else creditors could petition)
Debt Relief Notice (DRN) Unsecured (and secured in certain cases) Up to €20,000 3 years Approved Intermediary (AI)
Debt Settlement Arrangement (DSA) Unsecured No limit 5 years (+1) Personal Insolvency Practitioner (PIP)
Personal Insolvency Arrangement (PIA) Unsecured and secured No limit on unsecured

Up to €3m secured (though cap can increase if agreed)

6 years (+1) Personal Insolvency Practitioner (PIP)
Bankruptcy since 3 December 2013 Unsecured and secured Over €20,000 3 years High Court (voluntary declaration or else creditors can petition)

Note: You cannot apply on your own for a DRN, DSA or PIA. You must apply through an Approved Intermediary (for a DRN) or a Personal Insolvency Practitioner (for a DSA or PIA).

Insolvency Service of Ireland

The Insolvency Service of Ireland (ISI) is responsible for all matters concerning personal insolvency. Its role includes:

  • Certifying applications for Debt Relief Notices
  • Certifying applications for Debt Settlement Arrangement and Personal Insolvency Arrangements
  • Developing guidelines for insolvency procedures
  • Maintaining registers
  • Authorising Approved Intermediaries (AIs)
  • Authorising and regulating Personal Insolvency Practitioners (PIPs)
  • Monitoring the operation of the arrangements

The Office of the Official Assignee in Bankruptcy has been transferred to the ISI. This office administers the estate of a bankrupt person after the High Court has made a Bankruptcy Order.

How to apply

For a Debt Relief Notice, your application 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. To date, 40 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.

For a Debt Settlement Arrangement or a Personal Insolvency Arrangement, you must apply through a Personal Insolvency Practitioner (PIP). You can choose a PIP from the Register that is published by the ISI.

Further information is available from the ISI’s helpline 0761 06 4200 (Monday to Friday, 9 am to 6 pm) and from its website isi.gov.ie.

Page updated: 18 September 2014

Language

Gaeilge

Related Documents

  • Insolvency Service of Ireland
    The Insolvency Service of Ireland (ISI) administers the debt settlement procedures introduced under the Personal Insolvency Act 2012. The Official Assignee in Bankruptcy is based in the ISI and manages its Bankruptcy Division.
  • Personal Insolvency Arrangements
    People with secured debts who cannot pay their debts can apply for a Personal Insolvency Arrangement.
  • Debt Settlement Arrangements
    People who cannot pay their unsecured debts can apply for a Debt Settlement Arrangement.

Contact Us

If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.