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.
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.