PIAs are likely to prove popular

ONE of the most popular personal insolvency schemes, particularly for struggling homeowners, is likely to be the Personal Insolvency Arrangements (PIAs) as these include secured debt such as mortgages and unsecured debts.

PIAs are likely to prove popular

If the person has secured debt (such as the mortgage) of up to €3m as well as unsecured debt and has become insolvent, the PIA is an option worth considering. The upper limit can also be increased if creditors consent.

How will the debt be treated?

Over six years it will settle any unsecured debts hanging over the person. At the same time, the secured debt can be restructured for example to provide for payments for a period or a write-down of a portion of negative equity. Depending on the PIA terms the debtor may be released from a secured debt at the end of PIA period or the secured debt might continue to be payable by the debtor (perhaps on restructured terms).

Who is eligible to apply?

* You are insolvent if you are unable to pay your debts in full as they fall due;

* You owe debt to at least one secured creditor holding security over Irish property or assets;

* Your secured debts are less than €3m;

* You have co-operated under a mortgage arrears process for six months with your secured creditor in respect of your principal private residence and the result was that no alternative repayment arrangement was agreed, or the secured creditor confirmed it would not put in place such an arrangement.

What can be included?

The principal private residence; housing loans; investment property loans; buy-to-let mortgages/loans; personal guarantees; personal loans; credit union loans; business/commercial loans; credit card loans.

With the consent of creditors, the following can be included: Taxes, duties, levies owed or payable to State; local government charges; amounts due to the HSE under the nursing Home Support Scheme; annual service charges to owners’ management companies (apartments and housing estates); liabilities arising under the Social Welfare Consolidation Act 2005; local authority rates; household charges

How do you apply for a PIA?

You can only seek a PIA via a Personal Insolvency Practitioner (PIP) who will act on your behalf throughout the process. A list of PIPs will be published on the ISI website. The PIP person will, at the start, provide you in writing with details of the fee arrangements and likely PIA costs.

What happens next?

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

Once the PIP is happy you meet the criteria, your completed application will be submitted to the ISI. The ISI will forward your application to the appropriate court and if it approves it the court will issue a Protective Certificate. That offers you and your assets protection from legal proceedings by creditors while you apply for a PIA. A Protective Certificate stays in force for 70 days.

What happens with your creditors?

The PIP will meet with you and together 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 the extent to which you can pay your current and future debts.

After a draft proposal is agreed, it along with the PFS will be put to the creditors and a creditors’ meeting will be held.

What has to happen at the creditors’ meeting for PIA approval ?

Total debt — Creditors, representing 65% or more of the total amount of debts due, participating and voting at the meeting, vote in favour of the proposal.

Secured debt — Creditors, representing more than 50% of the value of secured debts, participating and voting at the meeting, vote in favour. For this purpose the value of a secured debt is the lesser of the value of the security or the amount of the debt.

Unsecured debt — Creditors, representing more than 50% of the amount of unsecured debts, participating and voting at the meeting, vote in favour of the proposal.

The creditors have approved. What now?

Where the PIA has been approved the PIP will notify your creditors and the ISI. The ISI will notify the court and the court will consider approving the PIA subject to any creditor’s objection. If the PIA is approved, your name, address, date of birth and the date of commencement of the PIA will be entered on the Register of Personal Insolvency Arrangements on the ISI website. You will then be require to implement the PIA terms, making payments as required to creditors through the PIP throughout the PIA’s lifetime.

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