The Personal Insolvency Act of 2012 created three new schemes for resolving unsustainable debt in Ireland. Two of these schemes, the Debt Relief Notice and the Debt Settlement Agreement, are designed to target only unsecured debts. This means they only offer debt help Ireland when it applies to credit cards, personal loans and similar debts. They cannot be used toward paying your mortgage or for a rental property. A Personal Insolvency Arrangement, however, includes both secured and unsecured debts. If you qualify for a PIA, you may be able to reach a settlement which will save your home and even prevent bankruptcy.
A PIA is a great way to avoid bankruptcy for many people who have between €20,000 and €3 million in debt. If you have more than this amount, a PIA may still be possible if all of your secured creditors approve. If you are on the verge of losing assets due to your financial struggles, or if you cannot meet your regular payments due to cash flow issues, a PIA may be the best option for freeing yourself from excessive debt.
PIAs are structured agreements regulated by the Insolvency Service Ireland and require you to commit to paying reduced debts back through a payment plan. These plans usually span six years, although they may last seven in some cases. At the end of the term, all of your unsecured debts will be discharged and your secured debts will be reduced to a cost you can afford. In this way, a PIA protects you from losing your home and other tangible assets.
The process of applying for a PIA isn't as complicated as you might expect. With the help of a Personal Insolvency Practitioner, you will file for a credit protective certificate. This will stop all pending and future action from creditors for a minimum of 40 days. Then you can begin to negotiate a new repayment plan for your debts.
The trustee will then determine how much you are able to pay each month while still allowing you to maintain a "reasonable standard of living" as outlined by the law. Then, he will propose an agreement to reduce your debts with each creditor. Once you approve the plan and your creditors accept it, the plan is put into effect.
It's important to mention that your agreement does not have to be approved by all of your creditors. The first hurdle is that it must be approved by creditors that hold at least 65 percent your total debt. Lastly, it must be approved by 50 percent of your secured creditors and 50 percent of your unsecured creditors. If your plan reaches these approval marks, it is a legal binding agreement.
While it does not have the cost, the time commitment or the High Court appearances of a bankruptcy, a PIA shouldn't be entered into lightly. When you sign the agreement, you are committed to paying your debts according to the agreement. If you fall behind, the negotiated agreement is cancelled, and you can expect your creditors to file a bankruptcy suit against you. For this reason, is important to always pay on time and according to your payment plan.
A PIA also requires you to live within a strict budget for the term of the agreement. It is better to look at this as a necessary exercise in responsible spending than as a downside of the process. If your financial situation improves before the agreement term has expired, your agreement will be re-evaluated and your payments may be increased.
In the midst of a personal debt crisis, foreclosure may seem unavoidable and bankruptcy may seem like your only choice. With the new debt relief laws, though, your house and other assets can be protected. You can also pay off all of your unsecured debts in just a few years. This is possible because a PIA allows you to create compromises with creditors to restructure your debts.