Debt relief under the Personal Insolvency Act 2012 (“the Act”).

Have you run up credit cards bills, overdrafts, personal loans and utility bills of €20,000 or less? Have you little or no income (ie. net disposable income of €60 per month or less) and little or no assets? (ie. value of your total assets is €400 or less – this sum excludes certain assets like a car, jetwellery etc ) Are you insolvent and have you no realistic prospect of paying your debts within the following three years? If the answer to all these questions is yes then the Act may help with debt relief by allowing you write off all your loans (up to €20,000) over a three year period.

You cannot write off some debt, however such as taxes owed to the State, monies owed to the HSE under the Nursing Homes Support Scheme, social welfare monies owed, monies owed under family law orders etc.

How do you apply?

You need to apply for a Debt Relief Notice (“DRN”). You must submit to a written statement disclosing all of your financial affairs to finance professional known as an Authorised Intermediary (“AI”) who will advise you whether you qualify and will assist you with the completion of a Prescribed Financial Statement. The Statement must be true, accurate and complete. It is then sent into the Insolvency Service (state body) for assessment. The AI will not charge a fee for this advice.

What happens if you are successful with your application?

If you are deemed eligible for a DRN your name will be put on a debt register. The DRN will remain in place for 3 years and you will be obliged to tell the Insolvency Service of any change in financial circumstances ie. any increases in income, assets or liablities. So for example if you receive a gift/payment of €500 or more or if your income increases by €400 or more you must give back 50% to the Insolvency Service. During this 3 year period you are protected from your creditor ie. he cannot sue you, contact you or make you bankrupt. After the 3 years the debt is written off and you will no longer owe anything to that creditor.

This debt relief only applies to un-secured debt so if your debts are secured for example on a house like a mortgage then the DRN is not a suitable relief but the Act does provide for relief from Mortgage debt through a Personal Insolvency Arrangement. I will outline the main features of this arrangement in my article next week.

Niall Colgan is a Solicitor based in Cork City, Ireland with 10 years experience

Mar 5, 13