Part 3 Chapter 3 of A Debt Settlement Arrangement (DSA) provides for the agreed settlement of unsecured debt with one or more creditors over a period of 5 years, with a possible agreed extension to 6 years if it is required.
The DSA’s assist people who have income, assets and debt which fall outside of the Debt Relief Notice category. It is possible to apply for a DSA based on the level of your income, assets and debts if you are ineligible for a Debt Relief Notice.
The financial statement is a key requirement and should be completed with the assistance and input of the Personal Insolvency Practitioner and this statement must be clarified by means of a statutory declaration.
This statement is a central part of the application for DRN status. In exchange for a discount of your debts you must be able to make some repayments to your creditors.
The DSA is a voluntary arrangement and it will have to get the support of creditors representing at least 65% of your total debt. Chapter 3 of the Act details the application process, eligibility and obligations arising for the registration of a DSA process.
You must process your DSA application through a Personal Insolvency Practitioner (PIP). A PIP is a professional debt adviser who is approved and registered by the Insolvency Service of Ireland to operate DSAs and Personal Insolvency Arrangements.
When the agreed period comes to a conclusion, and if your DSA has operated successfully, you will be discharged from the debts that it covered.
It is the PIP’s responsibility to:
- Advise the debtor about their options in relation to the insolvency and DSA application process;
- Assist and guide the debtor in their preparation of necessary documentation, for example the Prescribed Financial Statement which must be verified by a statutory declaration;
- If the criteria for meeting the DSA requirements are met then the PIP will apply to the Insolvency Service for a Protective Certificate in relation to the DSA process. If certain circumstances require a joint application then that is possible. The debtor must have a close connection or be a resident of the State. One application for a DSA per lifetime is permitted.
The following debts are excluded from the DSA:
- family maintenance payments
- taxes
- court fines
- local authority and service charges (unless the creditor agrees to this).
If the Insolvency Service authorises the application as an eligible DSA case then the necessary documentation will be provided to the court.
The court will then consider the application and subject to the creditor’s right to appeal, issue the Protective Certificate and notify the Insolvency Service.
If the application is granted then the next step is that the Protective Certificate is registered and a stand-still period of 70 days usually applies to allow the PIP to propose a DSA to the relevant creditors.
On application to the court no more than a further 40 days will be permitted. It is the PIP’s duty to inform the creditors about the issue of the Protective Certificate. When the Protective Certificate is issued the creditors may not contact the debtor or initiate legal proceedings or recover payments from them. The rights of secured creditor’s remains protected.
If a DSA application is accepted then it does not require the debtor to cease occupation of their principal residence where appropriate.
A DSA proposal must be accepted by 65% of the total creditors and is binding to all creditors when a majority in favour of the proposal is reached.
The Insolvency Service and the PIP inform each other and the relevant application is transferred to the relevant court and if there are no objections within 10 days then the DSA is approved and registered with the Insolvency Service.
The application will be administered by the PIP for the duration of the DSA. The Insolvency Service does not negotiate terms of a DSA.
There are other options for re-payment to creditors but the default payment, unless it is otherwise agreed with the creditors is on a proportionate basis. It is possible for an annual financial review of the circumstances of the DSA and the agreement can also be reviewed or terminated.
If a debtor does not fulfil the agreement of the DSA then they risk an application for adjudication in bankruptcy. When all debts are completed then the terms and conditions of the DSA are discharged.