{"id":388,"date":"2013-12-12T12:26:42","date_gmt":"2013-12-12T12:26:42","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=388"},"modified":"2019-01-25T12:28:21","modified_gmt":"2019-01-25T12:28:21","slug":"get-out-of-debt","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/get-out-of-debt\/","title":{"rendered":"Get out of Debt"},"content":{"rendered":"\n

It\u2019s a question many of us ask ourselves particularly in the current recession. There has been a huge growth in personal indebtedness in the last ten years. <\/p>\n\n\n\n\n\n\n\n

Most people feel that credit cards are largely to blame but in reality the blame must lie with those of us who borrowed too much money and the credit industry which extended too much credit to us. Neither borrowers nor lenders paid sufficient regard to our ability to repay our debts.<\/p>\n\n\n\n

Getting out of debt<\/strong> depends on many factors: the \namount of our debts; how much we earn; our assets; our standard of \nliving, our living costs and those of our family. Where we live might \nalso be a factor. Some jurisdictions have what might be described as \n\u2018debtor friendly\u2019 processes and procedures for people who unfortunately \nfind themselves unable to pay their bills or to repay their debts as \nthey fall due. Other jurisdictions are in the process of developing and \nenhancing their solutions for people who are personally insolvent. Take \nthe Republic of Ireland as a case in point.<\/p>\n\n\n\n

Getting out of debt in Ireland<\/h2>\n\n\n\n
\"Debt<\/figure><\/div>\n\n\n\n

Until recently, getting into serious debt in Ireland could turn out \nto be a life sentence. The bankruptcy laws were so outdated that very \nfew people were bankrupted there. The discharge period was at least \ntwelve years. The cost of bankruptcy was prohibitive and the bankruptcy \nprocedures were complex, bureaucratic, impracticable and essentially \nunworkable. The option of an Individual Voluntary Arrangement or IVA was\n not available in Ireland either. Successive Irish governments had \nfailed to act to provide such a solution fully twenty six years after it\n was introduced in the UK via the Insolvency Act of 1986. The UK later \nintroduced and expanded another personal insolvency solution for debtors\n with low levels of debts, low income and few if any assets. That was \nthe Debt Relief Order sometimes described as the \u2018poor man\u2019s \nbankruptcy\u2019, a somewhat unfortunate phrase given that any debtor who is \nfaced with bankruptcy can hardly be described as rich!<\/p>\n\n\n\n

So what has changed in Ireland?<\/strong><\/h2>\n\n\n\n

Well, quite a lot! The coalition government enacted the Personal \nInsolvency Act 2012 which introduced three totally new solutions for the\n personally insolvent and also amended the old bankruptcy legislation. \nThese solutions have only recently been rolled out or \u2018commenced\u2019,  the \nmost recent being the \u2018commencement\u2019 via ministerial order last week of \nthe implementation of some of the reforms of the old bankruptcy laws. \nThe delays in implementation of the new solutions is attributable in \npart to the delays in setting up and resourcing the necessary \ninfrastructure such as the establishment of the new Insolvency Service \nof Ireland and the training and authorization of licensed insolvency \npractitioners. The requirement that the debtor obtain a protective \ncertificate prior to offering proposals to creditors for two of the new \nsolutions was also a significant delaying barrier to implementation. \nMany insolvency experts consider this requirement unnecessary given that\n the UK jurisdiction has long discarded its \u2018Interim Order\u2019 procedure, \nexcept in the most extreme or pressing of cases.<\/p>\n\n\n\n

The first of the three new solutions is a Debt Relief Notice<\/strong>, very similar to the UK\u2019s Debt Relief Order<\/a>\n except that the duration is three years compared to one year in the UK.\n This is being made available via the government funded Money Advice and\n Budgeting Service or MABS and is for people with a relatively low level\n of debt, less than \u20ac20,000, as well as a low level of disposable \nincome, less than \u20ac60 per month and no more than \u20ac400 in assets, subject\n to some exemptions. See our separate articles on the details of the \nDRN.<\/p>\n\n\n\n

The second of the three new solutions is the Debt Settlement Arrangement<\/strong> or DSA<\/strong>\n and this is for people with unlimited amounts of unsecured debts which \nthey are unable to repay. The DSA does not deal with secured debts such \nas mortgages. People who may be eligible for a DSA must engage the \nservices of a personal insolvency practitioner<\/strong> or PIP<\/strong>.\n A DSA lasts for between five and six years during which the debtor \nmakes payments from disposable income and\/or from assets that are \navailable to them. Creditors are paid from these payments with the \nbalance of unpaid debts written off<\/strong> at the end of the term of the DSA.  See our separate articles on the details of the DSA.<\/p>\n\n\n\n

The third of the three new solutions is the Personal Insolvency Arrangement<\/strong> or PIA<\/strong>\n and this caters for people with both unlimited levels of unsecured \ndebts and secured debts of up to \u20ac3 million, unless creditors consent to\n a higher level, which they are unable to repay.  People who may be \neligible for a PIA must also engage the services of a PIP. A PIA lasts \nfor between six and seven years during which the debtor makes payments \nfrom disposable income and\/or from assets that are available to them. \nThe PIA may allow for the write-off of some portion of the secured debts\n as well as the unpaid balance of the unsecured debts at the end of the \nterm of the PIA. See our separate articles on the details of the PIA.<\/p>\n\n\n\n

The final piece of the jigsaw was the \u2018commencement\u2019 of the changes \nto the bankruptcy procedures in Ireland. The whole edifice of solutions \nto personal insolvency hinges on some mechanism being in place to \nencourage creditors to consider and accept DSAs and PIAs in particular. \nThe practical availability of bankruptcy provides the \u2018stick\u2019 in the \n\u2018carrot and stick\u2019 scenario whereby the debtor can make an offer of a \nDSA or a PIA to creditors while being able to state that if creditors do\n not accept the proposal, they will be forced into bankruptcy and \ncreditors will be forced to accept a much worse return than would \notherwise have been available. See our separate articles on the changes \nto the bankruptcy procedures.<\/p>\n\n\n\n

Debtors who do not wish to enter a formal statutory insolvency \nprocess can of course seek to reach an informal agreement with their \ncreditors. One option is to agree a debt management plan or DMP with \ncreditors. Advice can be obtained from MABS or from a specialist debt \nmanagement provider to set up and manage a DMP. For a fee such a \nprovider can negotiate with creditors on behalf of the debtor and make \nmonthly payments to them on a pro rata basis. The debtor makes one \naffordable monthly payment and the provider distributes this money \nbetween creditors. The charge for such a service varies from one \nprovider to the next, so the debtor should shop around to get the best \nvalue. There are downsides to a DMP. For a start it can last \nindefinitely and it would not be unusual for a DMP to last ten years. \nThere is no guarantee that creditors will agree to freeze interest or \npenalties. Furthermore, creditors can take legal action against the \ndebtor at any time. This is because there is inadequate legislation \ngoverning the operation of debt management plans. From a creditors\u2019 \npoint of view however, they can expect to recover all of the debts in \ntime.<\/p>\n\n\n\n

Getting out of Debt in the UK<\/h2>\n\n\n\n

If you live in England, Wales or Northern Ireland you can also enter a\n DMP but you also have additional options. The bankruptcy legislation \nthere has been simplified in recent years and you can be discharged from\n bankruptcy in just one year. You may however be subject to an income \npayments order for up to three years. Downsides in bankruptcy are that \nyou lose control of your assets such as your house. For some, bankruptcy\n may spell the end of their careers. For many, the perceived social \nstigma of bankruptcy is a major issue, although in reality this is not \nas devastating as it was historically. The big downside for creditors is\n that bankruptcy provides a very poor return and they often receive \nnothing. In Scotland, sequestration is the name given to bankruptcy and \nthe relevant legislation differs somewhat.<\/p>\n\n\n\n

English, Welsh and Northern Ireland citizens have a further legally \ncontrolled solution available to them in the form of an Individual \nVoluntary Arrangement or IVA. Some of the advantages of an IVA are that \ninterest and penalties on debts are frozen; the IVA will usually last \njust five years, although the term may be shorter or occasionally a \nlittle longer; bankruptcy is avoided and the debtor will usually be able\n to keep their house and car although they might have to address any \nequity therein during the term of the IVA; creditors will receive a much\n greater return for the monies borrowed from them compared to what they \nwould receive in bankruptcy; all legal action is stopped and the debtor \nis debt free on the successful completion of the term of the IVA. There \nare downsides to an IVA also. Under the legislation you must use the \nservices of an Insolvency Practitioner or IP. Fees for these services \nare deducted from the monies contribute by the debtor with the balance \nof these monies going to repay creditors. However, creditors will have \nagreed these fees up front so there are no surprises for either the \ndebtor or the creditors. The five years term is long compared to the \nthree years during which the debtor might have to make income payments \nin bankruptcy but is considerably shorter than the usual duration of a \nDMP. If the IVA should fail during its term, creditors are again free to\n pursue the debtor for the full unpaid balances and the protection \nenjoyed in the IVA would cease. In Scotland a Protected Trust Deed would\n be regarded as the equivalent of an IVA, although the relevant \nlegislation differs somewhat.<\/p>\n\n\n\n

Under EU insolvency legislation introduced in 2002 i.e. Council \nregulation (EC) No 1346\/2000, it might be possible to seek and obtain a \nsolution for your insolvency in another EU member state. For example, an\n Irish citizen might be able to enter an IVA or petition for bankruptcy \nin England, Wales or Northern Ireland. To do this the debtor would have \nto be able to show that their \u2018centre of main interests\u2019 or COMI is in \nthat other member state. The regulation states that \u2018the centre of main \ninterests\u2019 should correspond to the place where the debtor conducts the \nadministration of his interests on a regular basis and is therefore \nascertainable by third parties\u2019<\/p>\n\n\n\n

If you are insolvent and you think that your financial circumstances \nmay correspond to any of the scenarios summarized above and you want to \nconsider any of the options outlined, you should consider seeking \nfinancial advice and obtaining independent legal advice, particularly if\n you are considering bankruptcy or wish to avail of an insolvency \nsolution in a foreign jurisdiction.<\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s a question many of us ask ourselves particularly in the current recession. There has been a huge growth in personal indebtedness in the last ten years.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[6],"tags":[],"class_list":["post-388","post","type-post","status-publish","format-standard","hentry","category-general-debt-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/388","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=388"}],"version-history":[{"count":2,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/388\/revisions"}],"predecessor-version":[{"id":415,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/388\/revisions\/415"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=388"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=388"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=388"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}