Ireland now has the most powerful personal insolvency laws in the world.
These new laws are designed to assist people with unsustainable debt by restoring them to financial solvency while at the same time securing the family home and the tools of one’s trade.
There are 2 types of Insolvency Arrangement – a Debt Settlement Arrangement (DSA) and a Personal Insolvency Arrangement (PIA).
Both are arranged by a Personal Insolvency Practitioner (PIP). A PIP is a specialist who is licensed by the Insolvency Service of Ireland to provide services under the Personal Insolvency Act 2012.
Example of a DSA
John and Mary sold their ‘Buy to Let’ property and there is now a residual debt of €100,000. They have other unsecured debts of €25,000 - so their total unsecured debt is now €125,000.
The net household income is €54,000 (€4,500 per month). They have 3 children and their mortgage on the family home is €1400 per month.
They have met a PIP who has advised that they can afford to pay €300 per month towards their debt of €125,000. They can agree to pay this amount for 5 years meaning a total payment of €18,000. In the DSA the balance of €107,000 will be written off in full.
In this same case a family member has agreed to advance John and Mary €16,000. That is offered in full and final settlement of the debt of €125,000 and the remainder of €108,000 if written off in full.
Family now are released from unsustainable debt and can move on with their lives.
Example of PIA
John and Mary have a family home valued at €300,000 with an outstanding mortgage of €450,000. The interest rate is 3.75% and the term is 20 years. Full mortgage payments are €2668 per month.
They have sold their ‘Buy to Let’ property and there is now a residual debt of €100,000. They have other unsecured debts of €25,000 so their total unsecured debt is now €125,000.
The net household income is €54,000 (€4,500 per month). They have 3 children and cannot meet monthly payments on their home mortgage or their other debts.
They have met a PIP who has proposed as follows:
- Family Home mortgage reduced to €300,000 – term extended to 26 years – interest rate reduced to 3% = Monthly payments of €1400
- Payment of €300 per months on all other debts for 6 years (€21,600) and all remaining written off.
Family now has an affordable family mortgage and all other debts are written off in full – either by payment of €300 per month for 6 years or lump sum payment of €20,000.
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