What is DSA

 

The Act makes provision for a new insolvency procedure called a Debt Settlement Arrangement (DSA). A DSA can be entered into between a debtor and his/her unsecured creditors.

 

A DSA only includes unsecured debts without a limit on the amount of debt. However, certain unsecured debts cannot be included and certain other unsecured debts require the consent of the creditor prior to being included.

 

The DSA differs from a Personal Insolvency Arrangement (PIA) as it only includes unsecured debts. Unsecured debts are debts where the unsecured creditor would not be entitled to seize specific assets if the debtor fails to make repayments because that creditor does not hold security over those assets. Secured debts cannot be covered in a DSA.  A DSA must be agreed by the debtor and approved at a creditor’s meeting by 65% of creditors (in value).  In addition it must be processed by the ISI and approved by the Court.

 

Under a DSA, a debtor’s unsecured debts subject to the DSA, will be settled over a period of up to 5 years (extendable to 6 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 is PIA?

 

The Act makes provision for a new insolvency procedure called a Personal Insolvency Arrangement (PIA).  A PIA can be entered into between a debtor and one or more of his/her creditors.

 

A PIA can include secured and unsecured debts, but certain debts cannot be included in a PIA and certain other debts require the consent of the creditor prior to being included.

 

A limit of €3m applies to the amount of secured debt that can be included in a PIA, unless all secured creditors consent to the inclusion of a higher amount.

 

The PIA differs from a Debt Settlement Arrangement (DSA) as it includes secured debt. Secured debt is a debt backed or secured by an asset (e.g. a housing loan where a house is mortgaged to secure the loan debt).

 

A PIA must be agreed by the debtor and approved at a creditors’ meeting by a qualified majority of creditors. In addition it must be processed by the ISI and approved by the Court.

 

Under a PIA, a debtor’s unsecured debts will be settled over a period of up to 6 years (extendable to 7 years in certain circumstances) and the debtor will be released from those unsecured debts at the end of that period.

 

Secured debts can be restructured under a PIA (e.g. to provide for payments for a certain period or a write-down of a portion of negative equity).  Depending on the terms of the PIA, the debtor may be released from a secured debt at the end of PIA period or the secured debt can continue to be payable by the debtor (although perhaps on restructured terms).

*Subject to a cap of 3 million, unless creditors consent to a higher level.

What is Bankruptcy?

 

Bankruptcy is a process where the ownership of an insolvent person’s property transfers to the Official Assignee in Bankruptcy to be sold by him for the benefit of those to whom the individual owes debts (creditors).

 

Bankruptcy proceedings are brought in the High Court. The application for a Bankruptcy Order is filed in the Office of the Examiner of the High Court.  When the person’s property is sold, the Official Assignee will make sure that the proceeds are shared out fairly among creditors and any outstanding debt will be written off.

Bankruptcy normally lasts for 1 year.

 

MAIN CONSEQUENCES OF BANKRUPTCY

 

• Your property transfers to the Official Assignee.
• You have a duty to contribute from surplus income (income less reasonable living expenses) towards your debts for up to 3 years.
• You are discharged from bankruptcy after 1 year.
• All your unsecured debts are written off.

 

 

*Whilst it is possible to apply for bankruptcy yourself, it is advisable to seek professional advice to assist you in the process.