A Guide to a Debt Settlement Arrangement ( DSA )

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1 A Guide to a Debt Settlement Arrangement ( DSA ) May 2013

2 Contents Introduction... 2 What is a DSA?... 2 Eligibility... 3 What Type of Debts may or may not be included in a DSA?... 4 The DSA Process... 5 Key Features of a DSA... 6 Disclaimer The guide is for illustrative / guidance purposes only. The Insolvency Service of Ireland will issue further guidance to Personal Insolvency Practitioners regarding the regulation of the which may materially change the information contained within this guide. Please note that all circumstances are individual and a full review of financial position will always be required to ensure the appropriate advice and arrangements (if applicable) are sought.

3 Introduction The Personal Insolvency Act was signed into law on 26 December The Act is designed to alleviate the insolvency burden affecting so many people in the Republic of Ireland. The act is largely based upon similar personal insolvency legislation which has operated very successfully in the UK over the last 20 years. The Personal Insolvency Act s key function is to enable creditors to recover the debts due to them and to allow insolvent borrowers to repay their debts in a realistic, manageable and orderly manner. The Act has amended Irish Bankruptcy Law and also introduces three new mechanisms as an alternative including a Debt Settlement Arrangement. What is a DSA? You can enter a Debt Settlement Arrangement with your creditors when you are considered insolvent. You are considered insolvent when you are unable to pay your debts in full and as of when they fall due. A DSA will only include unsecured debts; there is no limit to the amount of unsecured debt when entering a DSA. There are certain unsecured debts that cannot be included in a DSA and certain unsecured debts require the consent of the creditor before it is entered into a DSA. Secured Debts such as Mortgages cannot be included in a DSA. Unsecured Debts are Debts where the creditor does not have the ability to seize specific assets belonging to the debtor should repayments not be maintained. A Debt Settlement Arrangement will begin when you and 65% of your creditors (in value) agree to the proposal put forward by the Personal Insolvency Practitioner ( PIP ). Under the DSA, your unsecured debts will be settled over a period of 5 years, with the possible extension of an additional year in certain circumstances, resulting in a DSA lasting 6 years. Once the DSA has been successfully completed, you will be discharged from the remainder of your debt at the end of the period.

4 Eligibility You are considered suitable for a DSA if you meet the following conditions:- You are insolvent and unable to pay your debts in full as they fall due. You have a total of one or more unsecured creditors. Your domicile must be in the Republic of Ireland, or you must have, within the past year, ordinarily resided or had a place of business in the Republic of Ireland. You have completed a prescribed financial statement and signed the statutory declaration stating that it is both true and accurate. You have obtained a statement from the Personal Insolvency Practitioner, that they are of the opinion that;- 1. The information in the PFS is true and accurate. 2. You are eligible to make a proposal for a DSA; and 3. Having Considered the PFS, they are of the opinion that you will not be solvent in the next 5 years. 4. Having considered all possible options, a DSA is the best solution for you and that there is reasonable prospect that you will become solvent upon completion of the DSA. You are NOT eligible to seek a DSA should the following requirements apply. You have incurred 25% or more of your unsecured debts within the past 6 months. You have been subject of a Debt Relief Notice now, or within the past 3 years. You must not be the subject of a Personal Insolvency Arrangement now, or within the past 5 years. You have been the subject of a DSA before. (With Exceptions) You are currently bankrupt, subject to a bankruptcy measure or have been discharged from Bankruptcy in the past 5 years. You have been the subject of Protective Certificate issued in respect of a DSA within the last year.

5 What Type of Debts may or may not be included in a DSA? Debts that MAY be included:- Personal loans. Credit Union Loans. Business/ Commercial Loans. Store Cards. Overdrafts. Personal Guarantees. (Liquidated and Called up) Debts that MAY be included but require CONSENT of Creditors to be included in a DSA (Excludable Debts):- Taxes, duties, levies owed or payable to the state Local Government charges Amounts due to the Health Executive under the Nursing Home Support Scheme. Annual service charges to owner s management companies ( Apartments and Housing estates) Liabilities arising under the Social Welfare Consolidation Act 2005 Local Authority Rates. Household Charges. Debts that CANNOT be included in a DSA (Excluded Debts):- Family maintenance payments under court orders. Court fines in respect of criminal offences. Liabilities arising out of injury or wrongful death claims awarded by the Court. Liabilities arising from loans obtained by Fraud. Secured Debts.

6 The DSA Process 1. Apply to the court for a protective certificate through the ISI Meet and appoint your PIP Provide the PIP with all requested information. PIP will then provide you with best option available which may be a DSA. Sign the application form and make Statutory Declaration. PIP will then apply for the Protective Certificate. 2. Agree to DSA Proposal Once the Protective Certificate has been awarded the PIP will then formulate your DSA Proposal. You then decide whether you want to agree to the Proposal, once you agree a Creditors meeting will be arranged. Creditors will then vote to agree with the Proposal. 3. Meeting the obligations of the DSA Once all parties have agreed to the Proposal, the DSA will then come into effect. Your details will be added to the Public Register of Debt Settlement Arrangements. You must comply with all aspects of the proposal and ensure payments are made and kept up to date. You will participate in reviews of the DSA at least once a year. 4. Successful completion of the DSA Upon completion of the DSA you will be discharged from your unsecured debts included in the DSA. Completion of DSA will be added to the Public Register. You will become solvent.

7 Key Features of a DSA A DSA is a legal arrangement between an you and your Creditors. A DSA cannot include Secured Debts, only Unsecured Debts may be included in the DSA. The Duration of a DSA can last up to 5 years, in some cases being extended to 6 years. You can only obtain a DSA once. Only a PIP can seek a DSA on your behalf In order for a DSA to come into effect, it must be formulated by the PIP, agreed by you and a majority of creditors at a Creditors meeting, then be processed by the ISI, approved by the courts and your details added to the Public Register of Debt Settlement Arrangements. A DSA will protect both the Debtor and his/her assets from legal actions taken by the Creditors, once the Protective Certificate has been obtained and throughout the course of the DSA. Upon completion of the DSA the Debtor will be discharged from the remainder of the unsecured debt included in the DSA. Successful completion of the DSA will then be recorded in the Public Register.