Personal Insolvency Arrangement (PIA)
The Personal Insolvency Arrangement (PIA) is a new solution available to people in Ireland, from the Personal Insolvency Bill 2012, to deal with secured debt and unsecured debt in an innovative and groundbreaking way. This solution applies to insolvent debtors whose combined secured and unsecured debts are up to €3 million (can be higher than this if all creditors are agreeable).
With the assistance of a Personal Insolvency Practitioner (PIP), the debtor can apply for a ‘Protective Certificate’ while the Personal Insolvency Arrangement is being prepared. This prevents creditors from taking any action for the recovery while the PIA is being drafted.
Creditors are offered an agreed percentage of what they are owed and an offer to pay this over a set period is made. If the debtor is in negative equity in regard to one or more secured properties such as a mortgaged home, the proposal may include provisions for writing down a proportion of the mortgage, and for reducing mortgage payments by extending the repayment period for a number of additional years.
For the Personal Insolvency Arrangement to be accepted, the applicant must have the support of at least 65% of all voting creditors both secured and unsecured. In addition at least 75% of secured creditors who choose to vote and at least 55% of unsecured creditors who choose to vote must vote in favour of the Personal Insolvency Arrangement proposal.
The Personal Insolvency Arrangement will normally run for a term of six years but it may be extended by an additional year.
A debtor may enter into a Personal Insolvency Arrangement only once in his or her lifetime unless exceptional or other external factors caused the debtor’s insolvency.
Personal Insolvency Arrangement (PIA) In A Nutshell
- Debts Up To €3 million
- Secured and unsecured debts could be written off
- Make Affordable Payments
- Requires the assistance of a Personal Insolvency Practitioner (PIP)
- Normally runs for a term of six years
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Thomas has a gross salary of €78,000. Thomas bought his house 9 years ago and while it’s now worth €300,000 he has a mortgage of €340,000 as he used the equity in the boom years as deposits to buy 2 apartments. The apartments, which cost him €270,000 each, are now each worth €150,000 and have outstanding mortgages of €260,000. One of the apartments is vacant and the other has rental income of €700 a month. The loan repayments are €1,500 each per month. Thomas also has unsecured debt of €34,000. After tax he has €5,000 a month to live on but his current outgoings are €7,000.
The vacant apartment was sold. The mortgage on the apartment that is rented will be reduced to €160,000 as this can be discharged on an interest and capital basis from the €700 a per month rental. His mortgage is extended by 5 years, reducing the monthly repayments by €300 a per month. His debts, which are subject to the Personal Insolvency Arrangement (PIA), amount to €248,000. The PIP calculates that Thomas can contribute €2,000 a month to his creditors for 6 years. This equates to €144,000 and results in the creditors recovering just over 50% of their debt. At the end of the 6 year period, Thomas exits his PIA debt- free, except for his mortgage and investment property which are now performing loans.
© Copyright 2016. Anthony Joyce is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.