Key Post A Personal Insolvency Arrangement does not have to be for 6 years!

Well informed people state that Personal Insolvency Arrangement lasts for 6 years and a Debt Settlement Arrangement lasts for 5 years.

This is not correct.

6 years is the maximum period allowed for a PIA and 5 years is the maximum period for a DSA. The PIP can propose a much shorter period.

But please don't take my word for it. Check out the Insolvency Service's [broken link removed] The first one is for John and here it is in their words

Given that the unsecured creditors will avail of the €9,000 as a lump-sum settlement for John’s unsecured debts, and considering John has no repayment capacity for the remaining unsecured debt, this PIA is a short-term arrangement, which will last four months
.

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While six years is the maximum duration for a PIA arrangement, it is possible under section 99 (2)(b) of the Personal Insolvency Act to have a shorter PIA when the PIP deems it the most appropriate duration. There is no minimum duration for a PIA.

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In this case, the unsecured creditors got a repayment of 9% and the rest was written off.


If a borrower has no repayment capacity, there is no point in having a 6 year PIA with no repayments being made.

Brendan

You are correct. The legislation provides for "lump sum" PIAs, i.e. just a single payment.

The majority of the "informal" settlements currently being done (certainly for business people) are "lump sum" settlements.

The commercial reality is that some peoples' incomes have been so reduced that they are not capable of making any meaningful payments out of their income.

Jim Stafford

Hi Jim

But even if there is no lump sum availabe, can't the PIA be short term?

If I have no lump sum or no surplus income, then there is no point in dragging it out over 6 years.

Ah but they might think things may improve over the 6 years so they keep their options open kinda like instalment orders that linger on for many years.

Brendan

As the PIA is a negotiated document, a shorter time period could be negotiated.

Jim Stafford

I think this is where having a good PIP comes in. And one the banks regard as someone whom they respect and whose opinion they consider worthy.

sitting my PIP course this week and brought this up, first lecturer said it should 'run 5 years to allow the maximum workout time', but indeed the code mentions (s651a for DSA's) that 60 months is a 'maximum'.

There will be a lot of interesting scenarios coming up, also want to clarify if 'pari passau' on voting equates to 'pro rata' on workouts.

If you had a credit card debt of 20k and Credit Union of 40k could you set it up such that the CU get virtually all and CC gets soaked?

All the ISI Case Studies pay unsecured creditors equally.

I suspect that if you did not do so, the minority could appeal the decision to the High Court.

If you had a money lender whose debt had built up through 100% APR, you could probably propose a scheme whereby the debt was reduced to the original amount lent plus reasonable interest.