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Controversy About Debt Settlement Arrangements In Ireland

16th September 2013

We wrote here in August about the imminent arrival of a new personal insolvency regime in Ireland. Historically residents of Ireland have not had access to formal debt resolution methods that stop short of bankruptcy. To compound the problem bankruptcy in Ireland was especially onerous with a discharge period of twelve years (it’s just one year for sequestration in Scotland).

As of last week the Irish have been able to apply (at last) for Debt Settlement Arrangements and Personal Insolvency Arrangements. The first PIPs (personal insolvency practitioners) have been authorised and the Insolvency Service of Ireland (ISI) is ready to accept applications.

It might be thought that by designing a new personal insolvency system from scratch those responsible could accommodate the best of similar processes that operate in the UK and elsewhere. Indeed, there’s nothing to say that the new Irish system doesn’t include all of this best-practice. However, from some of the reporting in the Irish media you’d think that the new system was entirely unfit for purpose.

The situation hasn’t been helped by a PIP going on record last week to say that professionals entering into personal insolvency might be able to retain homes that are larger than they need for their families to reflect their professional status. This has, unsurprisingly, caused general outrage. Debt Settlement Arrangements in Ireland (and the alternatives) certainly haven’t been designed to treat different social classes in different ways as described. The comments have fed into a general level of concern about the new personal insolvency regime but really just reflect the prejudices of the individual concerned.

There’s also much concern about how insolvent people will fund the fees charged by PIPs to administer Debt Settlement Arrangements (DSA) and Personal Insolvency Arrangements (PIA). In the UK we’ve become used to the idea that these fees will be drawn from the contributions made into a protected trust deed or an IVA. We’ve also become used to the idea that someone who isn’t able to fund a personal insolvency in this way will look to bankruptcy instead. This way of thinking isn’t currently entrenched in Ireland and there has been a fair amount of criticism that those that cannot afford to contribute to their debts will not qualify for a DSA or PIA.

Many counties in Ireland also currently have no qualified Personal Insolvency Practitioners. The ISI has approved very few thus far so the coverage is spread very thin compared to the perceived demand for their services. The fear is therefore that many people are currently being excluded from personal insolvency by a lack of access to a local PIP. Politicians representing the excluded geographies have been making their concerns very clear in the press.

If you’d like to learn more about these new personal insolvency options in Ireland you may wish to visit the DSA help forum that some of our team have been involved in creating. We hope that in time this advice forum will become as useful and well-used in Ireland as the Scottish trust deed forum (here on Trust-Deed.co.uk) has become over the years. This specialist Debt Settlement Arrangement website will also add articles into its news and articles section. The section will be updated over time to reflect general developments, concerns, progress and changes as they relate to personal insolvency in Ireland.

It’s anticipated that over time Debt Settlement Arrangements (and the alternatives) will become a valued process by which residents of Ireland can tackle serious debt problems in a dignified way. Hopefully as the public and media become more aware about how these options can help people some of the initial scepticism may melt away. It’s certainly clear from the UK experience that personal insolvency options which stop short of bankruptcy can be very much in the interests of both debtors and creditors alike. Proving that this can be the case in Ireland, to a concerned public and media, looks like it’s going to be tough challenge.

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