Brendan Burgess
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Requirements for a DSA:
From the Department of Justice briefing papers
What is a Debt Settlement Arrangement?
The Debt Settlement Arrangement (DSA) provides for a system of debt settlement betweena debtor and two or more creditors to repay an amount of unsecured consumer type debt only over a set period.
For example: Lets assume that that Mary has a number of unsecured debts such as
credit card, personal loans, overdrafts, retail, store catalogues, etc which amount to over €20,000. She has difficulty in repaying her debts in full, perhaps due to reduced income and pressure to maintain mortgage repayments.
(Similarly with the DRC, debts that do not qualify for inclusion in a DSA include secured credit of any type, fines imposed by a court and family maintenance payments).
Mary can now contact a personal insolvency trustee, who having examined her circumstances and completed a financial statement of affairs may apply to the Insolvency Service for a Protective Certificate in respect of preparation of a DSA. If granted by the Insolvency Service, the Protective Certificate would provide for a standstill period (30 days) during which creditors may not take action against Mary.
The next step is for the personal insolvency trustee to forward a DSA to creditors for their agreement. The proposal would set out the amounts to be repaid by Mary over a five year period and any particular conditions that might attach.
If approved by creditors (by a vote of 65% in value of qualifying creditors), the Insolvency Service would provide formal registration of the DSA.
At the satisfactory conclusion of the DSA after 5 years, all of Mary’s debts covered by it would be discharged in full. Mary could not apply for another DSA within a ten-year period.
The DSA will likely be subject to annual review by the personal insolvency trustee to reflect any changes in Mary’s financial circumstances. It may be varied or terminated and in that regard, Mary could be subject to an application for adjudication in bankruptcy on the ending, termination or failure of the DSA.
There are grounds for challenge by creditors to Mary’s DSA proposal and there is a role for the courts on application to have a DSA annulled.
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- The debtor has unsecured qualifying debts in excess of €20,000
- The DSA requires the approval of 65% in value of qualifying creditors
- Only one application for a DSA is permitted in a ten-year period
- A DSA if approved, is binding on all qualifying creditors
- The DSA will come into effect on registration by the Insolvency Service
- At the end of the DSA the creditor is deemed to be repaid in full and the debtor is discharged from the remainder of his/her debts covered by the arrangement
- In certain circumstances, with creditor approval, the DSA may be varied or terminated
- Creditors may challenge a DSA in the Circuit Court on specified grounds including where the DSA unfairly prejudices the interests of a creditor or where there is a material inaccuracy in the debtor’s Statement of Affairs which causes a material detriment to the creditor
- A DSA does not affect the rights of secured creditors
From the Department of Justice briefing papers
What is a Debt Settlement Arrangement?
The Debt Settlement Arrangement (DSA) provides for a system of debt settlement betweena debtor and two or more creditors to repay an amount of unsecured consumer type debt only over a set period.
For example: Lets assume that that Mary has a number of unsecured debts such as
credit card, personal loans, overdrafts, retail, store catalogues, etc which amount to over €20,000. She has difficulty in repaying her debts in full, perhaps due to reduced income and pressure to maintain mortgage repayments.
(Similarly with the DRC, debts that do not qualify for inclusion in a DSA include secured credit of any type, fines imposed by a court and family maintenance payments).
Mary can now contact a personal insolvency trustee, who having examined her circumstances and completed a financial statement of affairs may apply to the Insolvency Service for a Protective Certificate in respect of preparation of a DSA. If granted by the Insolvency Service, the Protective Certificate would provide for a standstill period (30 days) during which creditors may not take action against Mary.
The next step is for the personal insolvency trustee to forward a DSA to creditors for their agreement. The proposal would set out the amounts to be repaid by Mary over a five year period and any particular conditions that might attach.
If approved by creditors (by a vote of 65% in value of qualifying creditors), the Insolvency Service would provide formal registration of the DSA.
At the satisfactory conclusion of the DSA after 5 years, all of Mary’s debts covered by it would be discharged in full. Mary could not apply for another DSA within a ten-year period.
The DSA will likely be subject to annual review by the personal insolvency trustee to reflect any changes in Mary’s financial circumstances. It may be varied or terminated and in that regard, Mary could be subject to an application for adjudication in bankruptcy on the ending, termination or failure of the DSA.
There are grounds for challenge by creditors to Mary’s DSA proposal and there is a role for the courts on application to have a DSA annulled.
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