Debt Settlement Arrangement (DSA)
The Debt Settlement Arrangement is a new debt solution available in Ireland. Application for a Debt Settlement Arrangement can be made by an insolvent debtor (someone who cannot manage their debt repayments) who has unmanageable unsecured debts of any amount up to €3 million.
With the assistance of a Personal Insolvency Practitioner (PIP), the debtor can apply for a ‘Protective Certificate’ while the Debt Settlement Arrangement is being prepared. This certificate prevents creditors from taking any action for the recovery of debts, allowing the DSA to be drafted.
Under this scheme creditors are sent a Debt Settlement Arrangement proposal providing for payments to be made by the debtor for a period of five years. Creditors may agree to this but may like to extend this period for a further year.
Payments into the Debt Settlement Arrangement will generally only cover only a percentage of what is actually owed. Once the plan is complete any remaining debt, will be legally written off.
For the Debt Settlement Arrangement to be accepted, at least 65% of voting creditors must support it. Creditors are accorded voting rights strictly in accordance with the amount of their debts.
All creditors are bound by the decision of those creditors who choose to exercise their vote.
Debt Settlement Arrangement (DSA) In A Nutshell
- Debts Up To €3 million
- Unsecured debts could be written off
- Requires the assistance of a Personal Insolvency Practitioner (PIP)
- At least 65% of voting creditors must support it
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Ailish, a single parent with 2 children works as an advertising executive. She lives in in rented accommodation. Ailish has a 2008 car which she needs to get to work. She has no other assets and, after paying essential living expenses Ailish has €240 a month left from her salary. Ailish has 2 credit cards which total €18,000, a credit union loan of €9,000 along with a personal loan of €5,000. The combined monthly interest bill on her debts is €405.
A Personal Insolvency Practitioner (PIP) will review Ailish’s circumstances and based on all of her circumstances identify about €230 a month which will be ring-fenced to pay her liabilities. A proposal will be sent to her creditors. If 65% of the creditors at a creditors’ meeting approve the proposal, then the Debt Settlement Arrangement (DSA) will be binding on all creditors. This amount will be collected monthly by the PIP and distributed to the creditors. The DSA will last for 5 years and subject to Ailish complying with the agreement, the payments made by Ailish will be deemed to be in full and final settlement of all her debts. At the end of the DSA Ailish will be debt-free.
© Copyright 2016. Anthony Joyce is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.