The pathway to resolving your debts

MANY people find themselves burdened with huge levels of debt through credit card bills, unpaid utility bills and bank overdrafts.

At the same time, they may still be managing to pay the mortgage and the cost of the car loan.

In many cases, that is the right priority to adopt because the mortgage and car loans are “secured debt” — the home and car at risk of repossession if they do not keep up the payments.

But credit card bills, utility bills and bank overdrafts constitute unsecured debt. The creditor does not have security over them.

A person who has unsecured debt of any amount which they find they cannot pay, can choose to enter a Debt Settlement Arrangement (DSA).

* How will the debt be treated under a DSA?

The unsecured debts will be settled over a period of up to five years (extendable to six years in certain circumstances). If successfully complied with, the debtor will be discharged from debts specified in the DSA at the end of the period.

* What can be included?

Personal loans, credit union loans, business/commercial loans, credit card loans, store cards, overdrafts, personal guarantees.

With the consent of the creditors, the following can be included: taxes, duties, levies owed or payable to the State; local government charges; amounts due under the Nursing Home Support Scheme; annual service charges to owner’s management companies; liabilities arising under the Social Welfare Consolidation Act 2005; council rates; household charges.

* Who is eligible?

You are eligible to apply if:

- You are insolvent in that you are unable to pay your debts in full as they fall due.

- You have one or more unsecured creditors.

- You have a reasonable prospect of becoming solvent within five years if you enter into a DSA.

* How do you apply for a DSA?

You can only seek a DSA via a Personal Insolvency Practitioner (PIP) who will act on your behalf throughout the process. The PIP will, at the start, provide you in writing with details of the fee arrangements and likely costs involved in entering into a DSA.

* What happens next?

The PIP will formulate a Prescribed Financial Statement (PFS) based on your financial situation. You will have to provide documentation such as bank statements, bills, payslips, receipts etc.

Once the PIP is happy you are eligible and meet the criteria, that person will then submit your completed application to the Insolvency Service of Ireland (ISI) for consideration.

It will forward your application to the appropriate court and if it approves the application, the court will issue a protective certificate. That offers you and your assets protection from legal proceedings by creditors while you are applying for a Personal Insolvency Arrangement (PIA). In general a Protective Certificate remains in force for 70 days.

* What happens with the creditors?

Together with the PIP, you will prepare a proposal for the PIA which will include an honest and accurate account of your living expenses, life plans and any circumstances that may have a bearing on your ability to pay current and future debts.

A draft proposal along with the PFS will be put to the creditors and a creditors’ meeting will be held. A Debt Settlement Arrangement (DSA) must be agreed by the debtor and approved at a creditor’s meeting by 65% of creditors (in value).

* The creditors have approved. What now?

The ISI will notify the court and the court will consider approving the debt settlement arrangement subject to any creditor’s objection. Where it is approved, your name, address, date of birth and the date of the coming into effect of the DSA will be entered on the register on the ISI website,

You will be required to make payments to your creditors through the PIP throughout the lifetime of the arrangement.

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