What is a Debt Settlement Arrangement?
Debt Settlement Arrangement or DSA is one of three completely new measures contained in the Personal Insolvency Act 2012 which was passed into law in Ireland at the end of 2012 and which is intended to offer largely non-judicial debt settlement arrangements to debtors with personal debt problems. It is expected that eligible debtors will be able to avail of a DSA by mid 2013. The Insolvency Service of Ireland or ISI is currently assembling the infrastructure and will shortly be licensing Personal Insolvency Practitioners or PIPs to assist insolvent debtors to apply for DSAs.
Am I eligible for a DSA?
A DSA is not suitable for or available to every debtor and there may be other options available to those debtors who are ineligible to apply for a DSA. A DSA can only deal with unsecured debts and there are certain unsecured debts that it cannot deal with. Some unsecured debts may require the consent of the creditor prior to being included in the DSA. Secured debts cannot be covered by a DSA. For a DSA to be approved, at least 65% (by value) of the relevant unsecured creditors must accept the debtor’s DSA proposal.
To be eligible for a DSA, you must be insolvent. That means that you are unable to pay your debts in full as they fall due. You must have one or more unsecured creditors. Your domicile must be in Ireland or you must have, in the last year, ordinarily resided or had a place of business within Ireland.
You must complete a Prescribed Financial Statement or PFS and make a signed statutory declaration that it is true and accurate. You must also obtain a statement from your PIP confirming that the PIP is of the opinion that the information in the PFS is true and accurate, that you are eligible to make a proposal for a DSA, that having considered the PFS, there is no likelihood of your becoming solvent in the next five years and that if you enter a DSA there is a reasonable prospect that you will become solvent within the next five years.
There are also some pre-existing conditions in regard to your current and past financial status that you must comply with to be eligible for a DSA. You must not have incurred 25% or more of your debt during the past six months; you must not be the subject of a Debt Relief Notice or DRN now or within the past three years; you must not be the subject of a Personal Insolvency Arrangement or PIA now or within the past five years; you must not have been the subject of a DSA previously; you must not be bankrupt or subject to a bankruptcy measure or have been discharged from bankruptcy in the past five years and you must not have been the subject of a Protective Certificate or PC issued in respect of a DSA in the past year.
If I am eligible for a DSA, what do I do next?
You can only seek a DSA via a PIP who will act on your behalf throughout the process. The ISI proposes to put a list of PIPs up on its website and to maintain the list on an ongoing basis. Currently steps are being taken for the training, authorization and licensing of PIPs. When you have sourced and chosen a PIP from the ISI website to act on your behalf, you will obtain from that PIP, details of the fee arrangements and likely costs of entering into a DSA. You will not have to pay fees to the PIP directly. Fees and costs are expected to form part of the DSA proposal although the ISI is expected to charge a separate application fee. Our next article will look at the DSA process as it develops after you have appointed a PIP.
Written by Paddy Byrne 08/05/2013