Personal Insolvency and Bankruptcy

The government introduced new legislation in 2012 to alleviate the personal debt crisis that had arisen in the State due to the economic, financial, banking and property crash that occurred in 2007/2008. 

Since its inception in 2013 we have assisted hundreds of clients settle their debts through the personal insolvency process. This intervention has allowed them to retain their family home and put in place a long-term sustainable mortgage. In fact, as outlined in the case summaries below some of our clients have exited the process earlier than the standard 5/6 year term which has allowed them to finally move on with their lives free from unsustainable debts.

To consider if an individual is insolvent/bankrupt it is a simple mathematical test. If you are unable to meet your financial commitments as and when they fall due, you are insolvent.

We have included some recent insolvency case summaries below that were approved by creditors as examples of the work we do every day to help people to resolve their debts and stay in their homes.

We have also had a number of Section 115A appeal cases approved by both the Circuit Courts and the High Court. Section 115A appeal applications are required where a majority of creditors do not vote in favor of a PIA proposal. An application is then made to the court to request that the insolvency judge approve the arrangement despite the fact that it did not receive the required majority vote by creditors.

The number of licenced PIP’s has continued to decline from the peak number of 146 in June 2015. This number will continue to fall as this has become a niche area with less than 30 of the PIPs included on the ISI register actively operating and up-to-date with the legislation. This means it is even more important to get the right advice from the right PIP advisor

What Quintas can offer you:

  • Experienced, professional and battle-hardened insolvency experts
  • Informally dealing with the bank on your behalf
  • In house PIP to review your case and make an application for a PIA/DSA
  • An all-inclusive bankruptcy service
  • Financial review to protect your family home and your financial future
  • Refinancing opportunities and advice
  • Step in to your shoes – we take the calls, letters and emails, 
  • We deal with all types of creditors on your behalf
  • Non-judgmental professional service
  • Every problem has a solution – this is our core message to our clients.

What is Personal Insolvency?

A PIA (Personal Insolvency Arrangement) is for both secured and unsecured debt. PIAs differ from other debt management solutions in that you must have both secured and unsecured debt to apply. Secured debts would include family home loans, mortgage arrears, BTL debts, hire purchase agreements and any loans secured to a property or assets that you can no longer afford to repay. A PIA is for a 6-year term.

A DSA (Debt Settlement Arrangement) is for unsecured debt only. A DSA is for unsecured debts that would mainly be residual debts from BTL/investment loans, personal loans, credit cards, store cards and overdrafts. A DSA is for a 5-year term.

Both solutions are legally binding and supported by law. Once approved a formula will calculate what net dividend you need to pay to your creditors. There will be one affordable payment through your Personal Insolvency Practitioner who in turn distributes that payment to your creditors over the term of your arrangement. Any unsecured debt balances that remain after the PIA or DSA is completed will be written off, while secured debt balances are dealt with according to the terms of the PIA agreement.

Revenue debts and other preferential creditors can elect to form part of the arrangement and be restructured and/or written off 

Both a PIA & a DSA are arranged by a Personal Insolvency Practitioner (PIP). A PIP is a specialist who is licensed by the Insolvency Service of Ireland to provide services under the Personal Insolvency Act 2012.

What is Bankruptcy?

The main consequences of Bankruptcy are:

  • All unsecured debt is written off;
  • Property and possessions transfer to the Official Assignee (except for essential assets up to a value of €6,000);
  • Any surplus income (income less reasonable living expenses) must be contributed towards debts for up to 3 years;
  • If seeking credit above €650, a person must disclose that they are bankrupt;
  • A debtor must consider whether or not a PIA/DSA would resolve their debts before they can make an application for bankruptcy.
  • The bankrupt’s interest/share in the family home is transferred to the Official Assignee.
  • While there is a possibility of losing your family home, you should not assume that this is an automatic procedure in bankruptcy.

Discharge from bankruptcy is normally after 12 months. However, this term could be shorter if settlement with creditors is reached but it could also be extended if a person does not fully cooperate with the process.

The Key points to note for those with personal debt problems:

  • 90% of people who enter a PIA retain their family home
  • A Protective Certificate once issued supersedes all other courts and immediately adjourns legal proceedings against a debtor
  • A PC once issued allows a debtor 70 days to restructure their debts through the PIP. It can be extended by a further 40 days.
  • The family home loan can be written down to Current Market Value or to an affordable mortgage
  • The government supported Abhaile scheme provides free financial and legal aid to a debtor to allow them to seek the protection of the personal insolvency legislation
  • A PIA involves all preferential, secured and unsecured debts including Revenue, Govt rates, PPR, BTL, Commercial, Vulture Funds, Judgements, Judgement Mortgages, Business Debts, PG’s, personal loan, credit cards and overdrafts
  • A DSA involves unsecured debts only
  • The standard term for a PIA is 6 years and a DSA is for 5 years
  • To pass a PIA/DSA must have > 65% of creditors to support the proposal at a creditors meeting
  • If rejected the debtor(s) can appeal this decision to the insolvency court
  • Under the S115A appeal process Insolvency judges have approved numerous PIA cases that were rejected by creditors
  • The uptake in applications has been slow but the next 12/24 months will see a large increase in volume as debtors seek protection from banks and vulture funds
  • Reasonable Living Expenses (RLE’s) for the 5 or 6 year term are typically 30%/40% below normal living expenses
  • The dividend payable by the debtor to their creditors is a mathematical formula
  • This is a niche area with less than 30 active PIPs nationwide
  • Vulture funds will be very active in pursuing the loans they have bought from the pillar banks
  • Tracker Compensation & Redress Scheme is an ongoing process and those who have been affected should consider appealing the level of compensation offered by the bank

What is involved in the process when you engage with us?

  • Arrange a free consultation meeting with us to review your case.  
  • We will review your financial situation and we will explain in detail how the process works and how you can resolve your debt problems.
  • We will set out a detailed plan of your options and how you can resolve your indebtedness.
  • The following is a summary of your options:
  1. Informal restructure/settlement with your creditors is appropriate,
  2. PIA/DSA is the only way to resolve your debts,
  3. If none of the above options are appropriate, we will assist you make an application for bankruptcy.
  • We then document your financial details in a PFS and where appropriate we will apply for a Protective Certificate (PC).
  • When the PC is obtained from the court it gives a debtor full protection from their creditors. 
  • The PC period is for 70 days and during this time it is the PIP’s responsibility to negotiate with your creditors and formulate an agreement, based on the legislation.
  • Once an agreement has been reached, you will know exactly where you stand and what you need to do to complete the arrangement. 
  • As part of the 5 or 6-year DSA/PIA term a debtor will be subject to annual reviews. This is to consider if there have been any material changes to their financial circumstances.
  • At the end of the agreement period, any unsecured debt that has not been paid will be written off and the remaining secured debt will be structured at a level you can afford to repay
  • It is possible that a DSA/PIA term can be less than 5 or 6 years, but this would involve a lump sum settlement being accepted by creditors. This could reduce the insolvency arrangement term from between a minimum of 1 to a maximum of 12 months.

Case Summaries

Case Summary 1 – Accelerated DSA (6 months)

  • Type of Arrangement: Accelerated DSA (6 months)
  • Debtor: Husband sole applicant (Company Director)
  • Creditors: PPR and unsecured debts re Property Investments and Business Failure
  • Total Debts: € 6.3m
  • Total Net dividends: Proposed at € 75,930 (based on 5 Year DSA Term) OR € 30,000 for the Accelerated DSA
  • Total % Write off of the Net Residual Debt: 99.5%

Notes:

  • The majority of creditors accepted the € 30,000 lump sum as full and final settlement of the total debt due. 
  • The debtor made this payment within 6 months and he has now exited the insolvency process.
  • Creditors had no issue with the PPR loan notwithstanding that it was in positive equity.  
  • Judgment proceedings were scheduled at the time. 
  • The main issue related to unsecured debt due a business failure, property investment and speculation. 
  • A family member provided the lump sum.

Case Summary 2 – PIA - Variation of a Standard 6-year PIA term

  • Type of Arrangement: Standard PIA (6-year term)
  • Debtor: Husband & Wife (Private Sector)
  • Creditors: PPR, BTL, Commercial, unsecured debts, trade creditors and Revenue debts re Business Failure
  • Total Debts: € 1.75m
  • Total Net dividends: € 40,058 (based on 6 Year PIA Term)
  • Total % Write off of the Net Residual Debt: 97%

 Notes:

  • The PPR loan was reduced to a sustainable level. 
  • The BTL and commercial properties were surrendered. The judgment mortgages were included as unsecured debts. Revenue opted in to the arrangement. 
  • Due to ill health of one of the debtors a variation was proposed and accepted by creditors
  • A variation of the court approved 6-year PIA was required due to a material change in the debtor’s health and financial circumstances. 
  • The 6-year standard PIA was converted into an Accelerated 12-month PIA with a lump sum payable of € 15,000

Case Summary 3 – Accelerated PIA (12 months)

  • Type of Arrangement: Accelerated PIA (12 months)
  • Debtor: Husband & Wife (Public Sector)
  • Creditors: PPR, BTL, unsecured debts and Revenue debts.
  • Total Debts: € 2.1m
  • Total Net dividends: € 7,500 (based on Accelerated PIA 12-month Term)
  • Total % Write off of the Net Residual Debt: 99.8%

 Notes:

  • This was a complex case. 
  • The PPR loan was reduced by their retirement lump sum and from a personal loan to the debtor from a family member. 
  • The balance remaining on the PPR was treated as an unsecured debt. 
  • The BTL properties were surrendered. 
  • The debtors’ both retired and retained their PPR. 
  • They exited the arrangement after 12 months.

Q&A Interview on Personal Insolvency and Bankruptcy by Mark Ryan of Quintas with David Sweeney of Sweeney Solicitors 
 


 
This is a link to the full video on YouTube.


Mark Ryan is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.

Mark Ryan has been operating as a PIP since the inception of the Personal Insolvency legislation in 2012. With years of experience in negotiating debt restructures, personal insolvency arrangements and dealing with bankruptcy applications our team can advise you on the best course of action.

Mark Ryan
Mark Ryan
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Mark Ryan

Director

Mark Ryan

Role

Mark has worked in practice since 1998 and he has experience in all aspects of an accountancy firm. Mark is responsible for providing debt resolution, personal insolvency and bankruptcy services. He also provides business advisory services to a wide variety of clients in different business sectors.

Sector Experience

Mark has extensive experience in financial planning, restructuring and business advisory services.

Mark was one of the 1st Personal Insolvency Practitioners (PIPs) authorised by the Insolvency Service of Ireland (ISI) in August 2013. He has assisted hundreds of people resolve their debts and make a fresh start with their lives.

A PIP is a professional financial advisor who is regulated by the ISI to represent individuals in debt in applying for a DSA or PIA and to administer the agreement once it has been accepted and approved. This is a relatively new area of Law which was only introduced into Ireland in 2012.

Qualifications & Previous Roles

Mark completed his qualifications with the Association of Chartered Certified Accountants (ACCA) in December 1999 and he is a member of the Institute of Certified Public Accountants (CPA)

Mark completed his Personal Insolvency Practitioner (PIP) Certificate Examination in June 2013

Expertise Covers

Personal Insolvency & Bankruptcy, Debt Resolution, Financial Planning, Advisory, Restructuring.

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