1. What are PIAs and DSAs?A PIA is a Personal Insolvency Arrangement. A DSA is a Debt Settlement Arrangement.
Both are voluntary arrangements with your creditors (the people you owe money to) to repay part, or all of what you owe them. Both are forms of insolvency.
The arrangement with your creditors will normally be for the sale of your surplus assets plus a monthly contribution from your income after your reasonable living expenses have been paid.
Your arrangement will be administered by a Personal Insolvency Practitioner, often referred to as a PIP. PIPs are regulated and authorised by the Insolvency Service of Ireland.
2. What is the effect of entering such an arrangement?This is a serious step – you must be sure that you understand what you are signing up to.
Before you sign up, your PIP must give you advice (in writing) about your options and the consequences of the arrangement. The alternatives may include an informal negotiation with your creditors, a Debt Management Plan or Bankruptcy.
You should be aware that the PIP will charge for the work they do and that you can choose who your PIP will be. Your PIP will set out their fee for this work. Fees can be made up from lump sum payments made by you or a third party and/or from money ingathered by the PIP during the arrangement.
3. What is a Personal Insolvency Arrangement (PIA)?
A PIA is an arrangement between you and all your creditors (including your mortgage and any other secured creditors). It is binding upon you and your creditors. This means that, provided you comply with the terms of your PIA (including paying the agreed mortgage), your creditors cannot take further action to recover the money you owe or make you bankrupt. Your secured creditors may, however, still take action to take possession of your home if you fall behind with your restructured mortgage payments. A PIA prevents you from applying for your own bankruptcy.
If you take on any new debts after you enter a PIA, you will not be protected from legal action by your new creditors.
Like bankruptcy, a PIA will can affect your credit rating and can also prevent you from doing some jobs.
4. What is a Debt Settlement Arrangement (DSA)?Pretty much identical to a PIA but with the exception a DSA does not include any secured creditors. This would normally be the option for people who either live in rented accommodation or who do not need to restructure their mortgage.
5. How does my PIA/DSA get agreed?With your PIP’s help a proposal will be put to your creditors who then vote at a creditors’ meeting. If sufficient level of creditors vote to accept your proposal then with the Court’s approval it will become binding on you and all your creditors.
If your creditors object there is the possibility for you to appeal to the Court and have the Court over rule their objection if the Court considers the proposed arrangement to be fair and equitable.
The arrangement will be registered by the Insolvency Service of Ireland in the public Register. This means that your arrangement will come to the notice of organisations like banks and credit reference agencies.
6. Will my family, friends or colleagues/employer find out?We will only write to your creditors to inform them of your proposal and arrangement. There is no newspaper advert and your employer will not be contacted (unless they are a creditor). However, your PIA or DSA will be recorded on the public Register which is only normally scrutinised by financial organisations but technically it is a public register.
7. How long does a PIA or DSA last?There is no minimum term for either arrangement.
If a lump sum payment and/or asset disposal is accepted by your creditors it can finish almost immediately once agreed. This would normally be the situations where you have no surplus income after paying your reasonable living expenses.
If you have surplus income after paying your reasonable living expenses you will normally be required to pay a monthly contribution for a maximum of 5 years in a DSA or 6 years in a PIA (both of which may be extended by 12 months if your creditors require this to secure their agreement).
8. Will I have to sell my home?The personal insolvency legislation is specifically designed to try and allow you to remain in your home. However, this is conditional upon you being able to afford the mortgage and the home not being considered excessive in your circumstances.
A Personal Insolvency Arrangement (PIA) may include restructuring your mortgage (altering duration, interest rate and possibly writing some of it off). Your PIP will negotiate with your Bank should this be required. Any mortgage restructuring will ultimately need your creditors’ or the Court’s agreement.
Your PIP will work with you to try and agree a proposal that allows you to be able to afford your mortgage and stay in your home. Ofcourse, you may prefer to give up your house and therefore write off all the negative equity should you not like the deal your mortgage provider is offering in its negotiations with your PIP.
9. Can I keep my car?So long as your car is not unreasonably expensive or valuable and you need it for work or family reasons then you will normally be able to keep your car, possibly paying extra contributions to your arrangement.
10. What will happen to my pension?When setting what you must pay each month to your arrangement your PIP will normally allow a reasonable monthly payment to your pension fund to continue.
Normally your pension pot will be safeguarded in your arrangement so long as you haven’t made excessive pension contributions in the lead up to entering your arrangement.
However, should you be eligible to take a lump sum or income from your pension during the duration of your arrangement (or previously have been) then your PIP may require part of this to be paid into your arrangement. This should be fully investigated, discussed and agreed with your PIP before you agree to go ahead.
11. What will my creditors expect?As a general rule, creditors will expect you to repay as much as you can reasonably afford. Creditors do not have to accept the amount that has been offered and they probably won’t agree to your proposal if they think you can afford to pay more than you have offered or if they think that you ought to be made bankrupt.
When calculating whether you should be paying a monthly contribution from your income you will be allowed to maintain a reasonable standard of living which takes into account your individual circumstances.
12. What fees are paid to my PIP?Your PIP may be paid a fee by you for providing initial advice and consultation. Once a proposal has been agreed your PIP will be paid a fee, paid either from the realisations or from a third party. All such fees must be disclosed in the proposal to creditors and forms part of what they vote on.
All of this should be agreed in detail and in writing with you before you decide to go ahead and have a PIP put a proposal to your creditors.
13. Where does the money for my arrangement come from?The money needed to fund your arrangement and fees will usually come from two sources, contributions from your income and the sale of things that you own (assets). On occasion (for example where you have no equity in your assets and no surplus income) funds can come from third parties, such as family and friends.
If you have surplus income (after reasonable living expenses) you will normally be expected to pay a contribution out of your income. Your PIP will advise on how much you should pay after allowing for what you need to live on each month. There will be a standard approach to the calculation of income and expenditure. Such a contribution will usually be for a period of 5 years (in a DSA) or 6 years (in a PIA). These periods can be extended by a maximum of 12 months if required to secure agreement to the proposal.
14. What happens if my circumstances change during my arrangement?Your PIP will reassess your contribution when your circumstances change, for example if you are made redundant or a child is born. If your income goes up, your PIP will ask you to pay a higher contribution. If your income goes down, your PIP will propose to reduce or completely suspend your payments. Such material changes in circumstances will require a variation to be proposed to your creditors.
If you acquire new assets during your arrangement, such as an inheritance, lottery win or significant gift you must inform your PIP. Such a new asset is a material change in your circumstances which will require a variation to be proposed to your creditors. Your PIP will suggest how much is to be proposed to your creditors for you to pay in to your arrangement
15. What happens to my debts?At the successful end of your arrangement, you will be discharged from all the unsecured debts you listed in your proposal at the start. It is therefore vitally important that you include all your creditors on the list you provide to your PIP at the outset of discussions. These creditors will not be able to pursue money that was owed to them prior to you entering your arrangement.
There are some debts that are never written off. These include:
- Domestic support orders;
- Court awarded damages;
- Court orders in relation to proceeds of crime
- Court fines in relation to criminal offences;
- Loans obtained fraudulently or embezzlement;
- Remaining sums owed to mortgage or secured lender (although the PIA may write off part of your mortgage
- State Tax;
- Local Government Charges;
- Local Authority rates;
- Nursing Homes Support Scheme payments;
- Annual Service charges for multi-unit developments;
- Social Welfare debts.
16. What happens if I don’t co-operate with my PIP?A PIA or DSA is an arrangement you entered into voluntarily and if you fail to keep your side of the agreement there are implications for you. If you do not co-operate with your PIP during the period of your arrangement your PIP may decide to terminate the arrangement and your debts will not be written off. Furthermore it may result in Bankruptcy.
17. What should I do if I am unhappy with my PIP?If you are unhappy with your PIP it is very important that you talk to them about your concerns. Your PIP is the person who will decide whether or not you have met your obligations and whether you should be discharged from your debts when the arrangement ends.
All PIPs are regulated by the Insolvency Service of Ireland and you can contact them if you are unhappy with your PIP. You should raise your concerns with your PIP before making a complaint.
18. Do I get any of my assets back when I am discharged from my arrangement?Normally no. It is your PIP’s duty to realise the value from the assets included in your arrangement. There would not normally be any assets left over at the end of your arrangement.
Normally your family home, car and pension would not be included in your arrangement as assets to be sold and so you would normally keep these.
19. Can I be the director of a limited company?So long as the articles of association of the limited company do not prevent someone who has entered an arrangement acting as a director there is no legal bar to doing so. It is important you check this before going ahead with an arrangement.
20. Will this affect my job?Usually not but there may be certain specific jobs where the employer will not allow you to enter an arrangement with your creditors. It is important you check your contract of employment or speak to your employer before deciding to go ahead with an arrangement.
21. Can I hold public office?Some public bodies have rules stopping anyone who has entered an arrangement with their creditors from holding office. It is important you check this before deciding to go ahead with an arrangement.
22. Will my credit rating be affected?
Yes. The credit reference agencies will record details of your arrangement on your credit file.
23. Who can I contact for advice?If you are struggling with debt, you should seek advice as soon as possible from a suitably qualified person such as a personal insolvency practitioner (PIP) or your local Money Advice & Budgeting Service (MABS). Seeking advice and dealing with your debt at an early stage may help you avoid some of the more serious consequences of being in debt, such as legal action by your creditors and bankruptcy.