Insolvency arrangements could relieve the pressure on debt-ridden families

What it means for those struggling with debts

Why has this been set up?

Tens of thousands of homeowners are struggling with mortgage repayments and thousands more are debt-ridden having borrowed heavily in recent years. Unable to repay the loans, they are falling further into debt. The Government hopes to relieve some of that debt, under strict measures, and to allow families to begin again contributing to the economy.

How do I apply?

There are three categories in the agency for people with different debts. The category you fall into depends on how much you owe, the type of debt, whether there is a mortgage, and your income as well as your assets. Debtors can contact the personal insolvency service on 0761064200 or visit www.isi.gov.ie

When will the service be up and running?

New applications for insolvency will be able to apply by the end of June this year. By then, a cadre of personal insolvency practitioners (PIPs) will have been trained and will be ready to assess applications. Applicants will have to give a detailed breakdown of their spending including what goes on food, communication and health. Potentially up to 20,000 people could apply for debt relief in the first year.

Who will look after my case?

PIPs will handle cases, acting as a middleman between debtors and their lenders. PIPs are expected to be qualified solicitors, accountants or financial advisers. Their fee will be a commission, possibly as much as 5%, from the amount of funds that is agreed to be returned by debtors to lenders.

What happens when the agency is in place?

Debtors will be assessed for debt relief according to “reasonable expenditure” guidelines. The agency says a person entering a deal will not be able to live a life of luxury but neither will they live only at a subsistence level. Examples of limited expenditure include having €247 for a monthly food allowance, €49 for electricity, €43 for communication including phone use, and €126 per month for social inclusion and participation, which includes sports events or entertainment.

Who can I complain to if I don’t like the service?

Unlike a similar system in Britain, there is no appeals system here. But the Government insists banks will want to co-operate and enter into insolvency deals so they can get bad debt off their books and not have to repossess homes. However, banks ultimately have a veto against deals and can refuse offers or arrangements put together by insolvency practitioners.