What is a PIP?
PIP is short for Personal Insolvency Practitioner who will be playing an essential role in the implementation of two of the three new insolvency 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. The two measures are a Debt Settlement Arrangement or DSA and a Personal Insolvency Arrangement or PIA. You cannot avail of either of these two insolvency solutions without engaging the services of a PIP. In our last article we looked at how a debtor determines whether he or she is eligible to apply for a DSA up to the point of appointing a PIP to assist and act on their behalf. While you cannot appoint a PIP just yet, it is expected that the Insolvency Service of Ireland or ISI will shortly be licensing PIPs to act in the implementation of the new insolvency law and it will be posting a list of such PIPs on its website. You can choose a PIP from this list to assist you.
Will I have to pay a PIP for his or her services?
When you have sourced and chosen a PIP 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 will form part of the DSA proposal although the ISI is expected to charge a separate application fee.
What is the DSA Process?
You start off by meeting your PIP who will explain the DSA process to you. You will provide the PIP with your full financial details and the PIP will advise you on your suitability for a DSA. You sign the application for a DSA and make a signed statutory declaration as to the truth and accuracy of the financial information you have provided to the PIP relating to your income, assets and liabilities. The PIP, if satisfied that you are eligible for a DSA, makes an application to the court via the ISI for a Protective Certificate or PC. This is the first main step in the process.
What is a Protective Certificate and how is it issued?
A PC is a certificate issued by the court which offers you and your assets protection from legal proceedings by creditors while you are applying for a DSA. It remains in force for 70 days and it may be extended in certain circumstances. The ISI and the court review the application for the PC and if satisfied issue the PC to you via your PIP. The ISI enters the PC details on a public register.
How is a DSA approved?
With your co-operation and input, the PIP formulates your DSA proposal and with your written agreement circulates the proposal to your creditors, the ISI and the court and calls a meeting of your creditors. The creditors vote on your DSA proposal and assuming they accept it, the ISI are informed and having checked it, the ISI forwards it to the court for approval. Once approved by the court, the ISI enters the details on a public register and your DSA is now up and running.
How can I ensure that my DSA is successful?
You pay the monies you have offered in your DSA proposal to your PIP and comply with the terms of your DSA, including any modifications your creditors may have made to your DSA proposal at the meeting of your creditors and which you have already agreed to. Your obligations include co-operating with your PIP in implementing your DSA and participating in reviews of the DSA, which the PIP will conduct at least annually. The PIP will distribute the monies you have contributed to your DSA among your creditors, withholding the agreed amounts of PIP fees.
How is my DSA completed?
Once the agreed five years term of your DSA has passed and provided you have adhered to the terms of your DSA, your DSA is successfully completed and you stand discharged from your unsecured debts. The completion is recorded on the register of DSAs by the ISI and you are solvent again.
What can go wrong in the DSA process?
If you fail to adhere to the terms of your DSA, then the DSA can fail. However, there is provision in the DSA legislation for coping with adverse changes to the debtor’s financial circumstances. If your circumstances should change to the extent that it negatively affects your ability to make the repayments, you should inform your PIP immediately. Your PIP will advise you as to whether it is necessary to apply for a variation to your DSA and if so will prepare a variation proposal and seek creditor approval for the proposed variation. Again, 65% of creditors, as measured by the value of your debts, will have to approve the variation proposal for it to come into effect. In our next article, we will look at some of the difficulties that may arise in the implementation phase of the DSA and how they might be addressed via a variation proposal, when the debtor’s financial circumstances change, whether for the better or for the worse.
How can I contribute to the success of my DSA?
The good behavior of the debtor is the fundamental contribution that he or she can make to the success of the DSA. You are under an obligation from the beginning to act in good faith in your dealings with the PIP and to make full disclosure to the PIP of all your assets, income and liabilities and of any circumstances that may have a bearing on your DSA. You have a duty to comply with any reasonable request from your PIP to provide assistance, documentation and any other information deemed necessary including debt, employment, business, social welfare or other financial records. You must not obtain credit of more than €650 from any person without informing that person that you are subject to a DSA. You have a duty not to transfer, lease, grant security over, or otherwise dispose of any interest in property above a prescribed value (this value still to be advised) other than in accordance with the DSA. You have a duty to inform the PIP if you become aware of any inaccuracy or omission in your application for a DSA or during the subsequent supervision period of the DSA. You have a duty not to pay to creditors any additional payments separate to the DSA in respect of debts covered in the DSA. As well as these duties, you must also inform your PIP promptly if your financial circumstances change for better or worse both during the period of application for the DSA and during the supervision period.
Written by Paddy Byrne
07 / 05 / 2013