A Personal Insolvency Arrangement is a statutory process which may suit individuals with large unsustainable debts.
Part 3 Chapter 4 of the Personal Insolvency Act 2012 provides the information regarding personal insolvency arrangements, including applications, processes, eligibility and obligations.
A Personal Insolvency Arrangement (PIA) provides for the agreed settlement of secured debt up to a limit of €3 million (this cap may be subject to an increase with the consent of all secured creditors) and an unlimited amount of unsecured debt. A PIA will typically run over a period of 6 years, with an extra possible agreed extension to 7 years.
The PIA is similar to a Debt Settlement Arrangement in the following ways; you must apply through a Personal Insolvency Practitioner (PIP), and you must be able to make some repayments to your creditors in return for a discount of your debt.
It is a voluntary arrangement and will have to get the support of creditors (both secured and unsecured) representing at least 65% of your total debt. In addition, over 50% of your secured creditors and 50% of unsecured creditors must vote in favour.
When the agreed period ends, and if your PIA has operated successfully you will be discharged from the unsecured debts that it covered but the secured debt will only be discharged to the extent specified in the PIA.
The PIP usually advises the debtor:
- On their insolvency options and the process involved. A debtor is only eligible to propose a PIA if they are insolvent and unable to pay their debt within the period of the next 5 years.
- Guide and assist in the application including the Prescribed Financial Statement which has to be verified by means of a statutory declaration and other documentation.
- On the application for a Protective Certificate and a PIA. The debtor must typically be a resident of the state or have a close connection with it, a joint application may be necessary if a situation demands it.
- The following debts are excluded from a PIA: court fines, family maintenance fees, taxes, local authority fees and service charges.
- If the Insolvency Service are satisfied with a PIA application then the relevant documentation and the PIA certificate will be presented to the court which will consider the application. The court will process the application subject to the creditors right to appeal and will in turn process a PIA application and the certificate if all the terms and conditions are met.
- It is the PIP’s duty to inform the creditors of a PIA application and the certificate which will be registered by the Insolvency Service. A stand-still period of 70 days (which can be extended by a further 40 days on application to the court) applies for the PIA to propose a PIA to the listed creditors.
- The listed creditors cannot initiate contact or begin legal proceedings against the debtor for payment of debt once the PIA application has been registered.
- It is not necessary for the debtor to cease to occupy their principle residence when the PIA application is administered. There are various protections for creditors in the event of a subsequent sale of a mortgaged property where the mortgage has been written down.
- For a PIA application to be processed 65% of all creditors (based on the total value of secured and unsecured debt) must vote in favour of the PIA at the creditors meeting. This 65% must include over 50% of secured and 50% unsecured debt owed to the creditors (based on the total amount of debt).
- It is the PIP’s responsibility to inform the Insolvency Service of any creditor agreements and in due course the relevant court will be informed for the application to go ahead. If there is no objection to the application within 10 days then the application will be processed and providing all the terms and conditions are met then the PIA will be approved. The Insolvency Service will then be notified and they will register the PIA in the Register of Personal Insolvency Arrangements which will then bring the PIA into effect.
- The Personal Insolvency Practitioner will administer the PIA for the duration of the process. There are conditions of conduct which the debtor must satisfy and on the termination or failure to meet PIA conditions a debtor risks the application for adjudication in bankruptcy.
- The Insolvency Service has no role in the negotiation of the PIA terms and conditions. When the terms of a PIA have been met and it has come to a successful conclusion then all unsecured debts covered by the PIA are discharged. Other debts which are not covered under the PIA will remain.
Offences Under the Personal Insolvency Act 2012
Part 3 Chapter 5 of the Personal Insolvency Act 2012 details offences against the act including false representation and documentation, fraudulent disposal of property, etc.
Part 3 Chapter 6 of the Act entitled ‘Miscellaneous’ details the creation and maintenance of the insolvency registers which records details of persons concerned with debt resolution processes. The registers are in electronic form and are available to customers for viewing and copying if necessary.
Bankruptcy
Part 4 of the Act provides a number of coherent amendments to the 1988 Bankruptcy Act and provides for a much less costly approach to bankruptcy. The amendments follow on from the 2011 Civil Law Act (Miscellaneous Provisions).