How Does Bankruptcy Work in Ireland in 2017?

man considers filing for bankrupcy at his computerFiling for bankruptcy in Ireland in 2017 is a possibility for certain people whose insolvency cannot be overcome. If you – or someone you know -may be facing insolvency and considering declaring yourself bankrupt then it’s important to understand how bankruptcy works in Ireland.

This short article will provide a simple summary of bankruptcy procedures in Ireland by looking at three key areas: Eligibility for Bankruptcy, the bankruptcy process and the consequences of bankruptcy.

Let’s begin.

The 3 Criteria to Be Eligible for Bankruptcy in Ireland

  • In order to declare bankruptcy your debts must exceed your assets by at least €20,000.
  • The debtor must be insolvent, meaning that you are unable to satisfy creditors or discharge liabilities.
  • Before looking to declare yourself bankrupt you must first have attempted to resolve debt issue through Personal Insolvency.

The Bankruptcy Process in Ireland

  • The first step in the bankruptcy process is to complete a Statement of Affairs and a Statement of Personal Interests.
  • Them you will put forward an Application for bankruptcy to the High Court.
  • The final step is Adjudication.

 

The Consequences of Bankruptcy

Being legally declared bankrupt means that:

  • All if your debts are written off.
  • All of your assets (other than the necessaries of life) are transferred to the Official Assignee.
  • You may have to make payments to Official Assignee for up to 3 years following your declaration of bankruptcy.
  • You will be automatically discharged from Bankruptcy in 1 year.

 

There are a number of areas directly related to bankruptcy that you may have specific questions about. It’s important to know what you are getting into ahead of making a bankruptcy declaration and understand how being bankrupt will impact on different aspects of your personal and professional life.

I have many years experience handling bankruptcy applications and Personal Insolvency Agreements. The following are some of the most frequently asked questions around the subject of bankruptcy. I will be answering them with individual articles over the coming weeks. 

if you have another question please feel free to ask it in the comment box below or by sending me an email to info@newbeginning.ie and I will be sure to write an article and address it on this blog and add it to the  list below.

Bankruptcy in Ireland FAQs

What are the consequence of bankruptcy for my family home?

How will my pension be affected by bankruptcy?

Will there be a payment order after becoming bankrupt?

What are the implications of bankruptcy on being a director of a company?

What are the consequence of declaring bankruptcy for co-borrowers or guarantors?

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.

4 Ways to Deal with Unmanageable Debt

overview of desk with calculator and 4 hands

Being in debt is not an ideal situation for anyone. However, the best way you can help yourself is to be informed about debt management solutions. This article will help you understand 4 options for managing your debt.

The  4 ways in which to deal with unmanageable debt are:

1. Leave matters alone
2. Direct negotiation
3. Personal Insolvency
4. Bankruptcy

When a client comes to New Beginning we assess their circumstances and advise which of these options is best.

In many ways, they follow a sequence.

In other words, where doing nothing is not an option we look to direct negotiation. Where that is not working, we look to Personal Insolvency and finally if nothing else works there is the option of bankruptcy.

Doing nothing may seem a poor option though in some cases it is best advice – either in the short of medium term. Once people understand the laws and systems around debt they can move on with their lives, even if the actual problem has not been fully resolved.

Direct negotiation has its ups and downs and depends on the type of debt and the lenders involved. We deal a lot with the funds who can be very reasonable or very aggressive depending on who is behind the debt and the position it is adopting at that point in time. Often funds will make silly demands which need to be treated with a certain contempt. 6 months later when the fire has gone out a better deal can be struck.

Personal Insolvency is a very powerful tool – especially for homeowners. The law now provides that a Court can enforce a deal on a bank or fund where a home is concerned.

Bankruptcy is the final option and must be approached with caution. Professional advice should always be taken before seeking an adjudication in bankruptcy across a whole range of areas. We have come across cases where people have been adjudicated and have some very unpleasant surprises that could have been avoided if proper advice had been taken.

New Beginning is the only entity in Ireland that can provide all solutions.

We are licensed by the Central Bank to engage in direct negotiation with creditors. Since 2013 anybody providing this service needs a licence and the licence means that certain standards will always be maintained. For example, all of our advisers are fully qualified to the standards demanded by the Central Bank. It is interesting that many people offering such services are not qualified and this puts borrowers at great disadvantage.

New Beginning has its own Personal Insolvency Practitioners and we also partner with a larger firm of Personal Insolvency Practitioners to ensure that our clients get the best service possible.

Finally, we have lawyers and experts available to bring clients through the bankruptcy process where that is necessary.

In addition to all this New Beginning Financial Services have experts in pension law to advise people on the best protection measures available to gain best benefit from the laws that protect pensions in insolvency and bankruptcy.

At New Beginning, we now offer funding services for our commercial clients and we are ramping up our Mortgage to Rent offering over the coming months.

For more information on us and our services and how we could help you call us on 01-5240000 or email us on info@newbeginning.ie

Post Retirement Options and Debt

post-retirement couple assessing their finances

When you approaches retirement there are serious decisions to make. The choices you make at retirement can have lasting effects on your pension savings and how you can access them into retirement.

The drawdown options available to you at retirement can be complicated even more by having a mortgage debt issue which needs to be resolved. So allow me explain where this can get complicated.

TAX FREE CASH VERSUS ANNUITY

If you are entering an insolvency or bankruptcy process you must fill out a Standard Financial Statement that lists your assets and your incomes.

Assets are typically at serious risk of being used to pay creditors before any deal is done or be lost to the Official Assignee if entering a bankruptcy process. Income however is allowable to a certain level.

So when you are deciding between having accessible cash or an income for life the decision of which to choose is likely to be very different should you be considering a debt process. You will need to seek advice if you are approaching this juncture.

AMRF VS ARF

An AMRF is a retirement pot which is locked away until a client reaches 75, unless they show they have a guaranteed income for life in excess of €12,700 (currently). The first €63,500 of a client retirement assets after the lump sum is taken must be invested in an AMRF if they do not have this guaranteed level of income. An ARF on the other hand is fully accessible to the clients and can be drawn down at short notice.

The rules surrounding AMRF’s have changed recently. Previously you could access any amount over the €63500 so any growth or interest earned could be taken subject to tax. Now a client can only take 4% per annum regardless of the AMRF’s value.

So how does this affect clients entering a debt process? Often clients would like access to their AMRF to help them pay down their debts but believe they can’t have access to it. This is true but an AMRF can be turned into an ARF if a client can satisfy one rule and that is if they can show a guaranteed income for life in excess of €12,700. Often a client will be in receipt of the Old Age pension from the state of circa €12000. So all a client needs to do to convert their AMRF into an accessible ARF is to buy a small annuity which will deliver income of €700 per annum. Crucially this will unlock the remaining AMRF allowing them access to their funds which can then be used to address short term needs.

CONCLUSION

These are just 2 of the many pension related situations we come across everyday so please just get in touch with me directly if you have any pension related questions that are concerning you.

Now for the disclaimer. Pensions are very complicated and each individual case should be assessed on its own merits. The rules are there to be applied and used for each of us so please take advice on your situation before making any lasting decisions. Finally if you are considering entering a debt negotiation or process please consider your pensions assets and what form they are in. Your pension assets could be at risk of being lost against your wishes or indeed could be used to help you address your debt but pension planning in advance is vital.

If you would like to discuss your own situation, please feel free to get in touch with me directly on email on nick.lawlor@newbeginning.ie or contact the office on 01-5240000 and I would be happy to look at your situation to find out.