Personal insolvency options
There are 3 debt resolution procedures to help mortgage-holders and other people with unsustainable debt to reach agreements with their creditors. These procedures offer different solutions to people in different situations. Each option has its own rules and procedures.
One important issue is whether your debts are secured or not. Secured debt means debt backed by an asset, for example, a mortgage. Unsecured debt includes debts on credit cards, loans and overdrafts.
The 3 debt resolution procedures are:
- A Debt Relief Notice (DRN) to allow for the write-off of debt (generally unsecured and in some cases secured) up to €35,000, with a 3-year supervision period
- A Debt Settlement Arrangement (DSA) for the agreed settlement of unsecured debt, with no limit involved, normally over a period of 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 a period of up to 6 years
These procedures were introduced by the Personal Insolvency Act 2012 and are described in more detail below.
If you have tried to solve your debt problems with these procedures but they are not suitable you can apply for bankruptcy. Bankruptcy is a formal High Court process for people with debt over €20,000.
Each of the 3 debt resolution procedures 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 procedures (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 procedures 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 for the statement is set out in the Personal Insolvency Act 2012 (Prescribed Financial Statement) Regulations 2014. You must sign a declaration that you are acting in good faith and co-operate fully with the process.
You will have to give your written consent that certain personal data held by banks and other financial institutions can be accessed so that your financial situation can be verified. Government departments and agencies will have the power to release certain information about you.
If you use any of these 3 procedures, your name and details will be published on a register, which is available to the public on the ISI website. The success or failure of the process will also be recorded.
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 €35,000 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 someone who is authorised by the ISI to assist you with your application.
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 levels of your income, assets and debts mean that you are not eligible 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 apply 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. This means that the debts will be written off.
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 limit may be increased with the agreement of all secured creditors) and an unlimited amount of unsecured debt. A PIA will run over a period of up to 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. However, if a mortgage lender rejects the personal insolvency proposal you can apply for a court review of the rejection.
Abhaile, an aid and advice scheme for people in serious mortgage arrears provides for free legal representation for eligible borrowers in seeking such a review.
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.
Summary of procedures
|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 Arrangement (DSA)||Unsecured||No limit||5 years (+1 in some cases)
|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 in some cases)
|Personal Insolvency Practitioner (PIP)|
|Bankruptcy||Unsecured and secured||Over €20,000||1 year||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 is based in 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. All Money Advice and Budgeting Services (MABS) companies are authorised as Approved Intermediaries and AIs are available in most MABS locations across the State. 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 0818 07 2000, Monday to Friday from 9 am to 8 pm.
Read more on mabs.ie.
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.
The following table lists some of the key actions under the 3 debt resolution procedures and which body or individual is responsible for each of them:
|Who performs the action for each procedure?|
|Prepare application/proposal with debtor||Approved Intermediary (AI)||Personal Insolvency Practitioner (PIP)||Personal Insolvency Practitioner (PIP)|
|Verify application||Insolvency Service of Ireland (ISI)||ISI||ISI|
|Register protective certificate after Court approval||n/a||ISI||ISI|
|Issue DRN||Specialist judges of the Circuit Court||n/a||n/a|
|Review DSA/PIA proposal and approve or reject: if total liabilities are not over €2,500,000||n/a||Specialist judges of the Circuit Court||Specialist judges of the Circuit Court|
|Review DSA/PIA proposal and approve or reject: if total liabilities are over €2,500,000||n/a||High Court||High Court|
|Administer terms of DRN/DSA/PIA when in effect||ISI||Personal Insolvency Practitioner (PIP)||Personal Insolvency Practitioner (PIP)|
|Monitor operation of DRN/DSA/PIA||ISI||Personal Insolvency Practitioner (PIP)||Personal Insolvency Practitioner (PIP)|