Are you burdened with debts that you fear you will never be able to pay?
Do you worry about your family home and making mortgage payments?
The Personal Insolvency Act 2012 was brought into Irish law to help individuals like you. This act provides solutions, one of which is a PIA (Personal Insolvency Arrangement).
Personal Insolvency Arrangement (PIA)
A personal insolvency arrangement may be appropriate for you if
- You are insolvent but can make some payments towards your debts and
- You have a mortgage
The PIA is a formal arrangement with your creditors which allows you to write off some debt and restructure other debt. Creditors can no longer contact you about the debts and you will almost certainly be permitted to stay in the family home and avoid repossession.
A PIA has a supervision period of 5 years and must be agreed by you and approved at a creditors’ meeting. If your creditors do not agree you can go to court and ask the court to impose the deal on your creditors.
These are the cases you see reported in the press where some of the write offs are eye watering.
When a PIA is in place you are allowed reasonable living expenses. The Insolvency Service of Ireland (ISI) have a calculator on their website which allows you to calculate reasonable living expenses. This will consider your personal circumstances-for example, one parent family or couple or single etc.
At the end of the supervision period, provided you have stuck to the deal, the unsecured debts you owe are written off. You will still have the debt on your secured debts, for example your mortgage.
If your circumstances change during the term of the PIA the PIA terms can be changed.
How do you get a PIA?
You must apply through a personal insolvency practitioner (PIP).
The PIP will charge a fee for this service. Some PIPs offer a free, initial consultation.
The MABS can give you a voucher under the Abhaile scheme to allow you get a free consultation with a PIP.
What debts does a PIA cover?
Secured and unsecured debt including home loans, investment property loans, buy to let mortgages, credit union loans, credit card loans, business loans, personal guarantees.
Debts that cannot be included include family law maintenance, court fines, liabilities arising from personal injury claims, loans obtained by fraud.
Debts that may be included, with the permission of the creditor, include household charges, local authority rates, taxes and duties payable to the State, annual service charges to management companies for apartments and houses.
Are you eligible for a PIA?
Firstly, you must have co-operated in a mortgage arrears process with the secured creditor for your home.
You must be
- Be likely to remain insolvent for 5 years
- Have secured debts of €3 m or less; there is no limit on unsecured debts
- Owe debt to at least one secured creditor holding a charge/security over Irish property
- Not have had a PIA previously
- Not had a protective certificate in the past year
- Not had a Debt Relief Notice in the last 3 years
- Not had a Debt Settlement Arrangement in the last 5 years
- Not been involved in a bankruptcy in the last 5 years
How do you apply for a PIA?
You must use a PIP and will have to complete a Prescribed Financial Statement setting out your financial circumstances honestly.
You will find a list of PIPs here.
Another useful source of information is MABS and the Abhaile service which is sponsored by the State.
Steps in a PIA
- Check eligibility
- Choose a PIP
- Get all your information assembled before PIP consultation
- PIP consultation, advice
- Appoint a PIP
- PIP applies for Protective Certificate
- PIP notifies your creditors
- PIP proposal-PIP invites creditors to make their proposals as to how the debts will be dealt with as part of a PIA
- Creditors’ meeting-over 50% of creditors must vote in favour of your PIA
- Court approves the PIA and it comes into effect
- Ongoing review of PIA each year with your PIP
Alternatives to a PIA
If a PIA is not suitable for you there are other options including
- Voluntary arrangement with your creditors
- Debt relief notice (not suitable if you have a mortgage, suitable if your debts are less than €35,000 and you are on low income)
- Debt settlement arrangement (no minimum or maximum limits on your debts, but not suitable if you have mortgage)
- Bankruptcy-this is an option of last resort.