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21st May 2014

A new system for personal insolvency was launched in Ireland last year and received great media attention. Since then there has been substantial criticism as use of the new options has run at lower than expected levels. In this article we review the “personal insolvency arrangement” in particular, having previously written about the alternative debt settlement arrangements.

Personal insolvency arrangements have much in common with IVAs and Scottish trust deeds. The debtor offers a deal to his or her creditors to pay what they reasonably can for a fixed period of time. If the creditors agree to this deal it’s likely that some of the debt will eventually be written off (if it hasn’t been repaid by the end of the term). Contributions are usually funded from an assessment of monthly disposable income, from the realisation of assets, or via a combination of both.

Where a PIA diverges from the UK alternatives to bankruptcy is the fact that secured debts can be addressed as well as unsecured debts. Ireland has suffered a notable mortgage crisis. Huge numbers of people are trapped with extreme levels of negative equity. The level of mortgage arrears runs way beyond anything witnessed in the UK in recent years. Entering a PIA in Ireland might help an individual or household to address this issue.

The aim was to create a system that could create compromise between mortgage lenders and distressed mortgagees that would enable the owner to remain in their home. It might be the case for example that monthly payments are reduced by extending the mortgage term or reducing the interest rate on some or all of the debt. It could however be requested that some of the mortgage debt is written off, perhaps to eliminate any negative equity.

The team behind this site has been involved in creating an interactive online resource about personal insolvency arrangements in Ireland. It includes information that helps to explain more precisely how a PIA operates so that people can consider whether it’s a sensible route for them to take.

We’ve also incorporated a personal insolvency help forum into the website on behalf of the website’s operator. This forum links the public with experts trained in both the theory and practice of the new Irish debt management solutions. They can offer information and advice which will be invaluable to anyone that wishes to deal with personal debt problems while resident in Ireland.

So far relatively few of these new debt management solutions have been formally approved in Ireland. Despite this there has been much public interest. As knowledge grows and the insolvency community establishes protocols with the mortgage lending industry it’s hoped that many thousands of people will become able to sustainably tackle their debts and remain in their homes.

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