The Pros and Cons of a DSA and PIA

 

What is the difference between a DSA and a PIA and what are the advantages and disadvantages of each?  If you are looking for a debt management solution then you’ll need to know this, and you’ve come to the right place.

The following article will help you understand the pros and cons of a Debt Solvency Arrangement and a Personal Insolvency Arrangement.

person considering a debt settlement arrangement

The Pros and Cons of a Debt Settlement Arrangement

A Debt Settlement Arrangement (DSA) is a formal arrangement made between a borrower and his or her creditors. It deals only with unsecured debts and so does not include mortgages.

The steps are as follows:

1-Debtor has debts that cannot be repaid.

2-Debtor’s circumstances are analysed to determine whether he can afford any payment.

3-If the debtor can afford to make some payment a proposal is made whereby the debtor pays what he can for a period of up to 60 months.  After this time the balance is written off.

Pros of Debt Settlement Arrangement (DSA)

-Debt is written off – usually up to 80% of the amount.

-Debtor is solvent and his credit rating will return.

-A DSA can deal with multiple creditors where they will all be bound by the arrangement.

-In most cases there will be no fees payable.

 Cons of a Debt Settlement Arrangement (DSA)

-The arrangement is a formal arrangement.

-There is a vote where 65% of the amount of the debt must agree so the deal can be rejected in some circumstances.

-60-month arrangement with reviews every year.

The 60-month arrangement is often something that people do not like. This can be overcome by a lump sum payment in lieu of the 60-month arrangement. We often see cases where a debtor can source funds from a third party to be able to make a once off payment and be free from the debt immediately.

 

The Pros and Cons of a Personal Insolvency Arrangement

A Personal Insolvency Arrangement (PIA) is a formal arrangement made between a borrower and his or her creditors. It deals with all debts and is particularly important for family homes.

The steps are as follows:

1-Debtor has debts that cannot be repaid which include a mortgage.

2-Debtor’s circumstances are analysed to determine what he can afford with priority given to the family home.

3-If the debtor can afford to make adequate payments, a proposal is made whereby the debtor pays a restructured mortgage and a contribution to other debts for a period of up to 60 months, after which the balance of the other debts is written off.

 

 Pros of a Personal Insolvency Arrangement (PIA)

-Family home is made secure by restructure which can include substantial debt write off.

-Other debts are written off – usually up to 90% of the amount.

-Debtor is solvent and his credit rating will return.

-A PIA can deal with multiple creditors where they will all be bound by the arrangement.

-In most cases there will be no fees payable.

-Where a bank rejects the deal, the Court can intervene and impose it on the creditors where the Court decides the deal is fair.

 

Cons  of a Personal Insolvency Arrangement (PIA):

-The arrangement is a formal arrangement.

-In some cases, the debtor may be required to make payments towards unsecured debt for a period of up to 72 months.

 

Thank You

I hope you found this article useful. Should you have any further questions about a DSA or PIA or indeed about debt management more generally please do not hesitate to get in touch with the New Beginning team.  We are here to help.