What about the Personal Insolvency Plans? What bearing do they have on debts that you are trying to collect? Do you have any say in the process? This depends on the type of scheme entered into and also whether the debt is secured or unsecured.
Debt Relief Notice:
Where a debtor successfully enters a ‘Debt Relief Notice’ (when it is approved by the Court, when he/she has debts of €35,000 or less that are unsecured, and when the debtor has a monthly disposable income of €60 or less and assets of €400 or less), all debts are cleared. Because of this complete debt forgiveness, no creditors will recover any outstanding money owed to them.
Debt Settlement Arrangement
Where a debtor enters a ‘Debt Settlement Arrangement’ (where he has unsecured debts of more than €35,000 where the debtor has an income or an asset), the debtor enters an agreed supervised payment plan during which time no action may be taken by creditors. It is a voluntary debt management plan and it will have to get the support of creditors representing at least 65% of the total debt. You can expect to see the return of some of your money, in particular if there is an asset to sell. However, in order for this to work, all creditors will need to take a significant discount on their debt and any creditor who is not happy with the arrangement can apply to the Courts. If a debtor breaches the settlement arrangement, the full amount falls due again.
Personal Insolvency Arrangement
A ‘Personal Insolvency Arrangement’ is a 6 year payment plan to pay back debt where the creditor is insolvent. It deals with secured debts of up to €3 million and unlimited unsecured debt. A proposal will be put to creditors by a Personal Insolvency Practitioner hired by the debtor and it must be approved by over 50% of secured creditors and 50% of unsecured creditors who represent at least 65% of the total debt. Again, any creditor who is not happy with the arrangement can apply to the Courts. In practice, if the debt is unsecured, you will not recover much of your money.
Bankruptcy
Bankruptcy has also been revised by the legislation and it is open to you to apply for your debtor to be made bankrupt. When this happens, the Court takes over his/her financial affairs. The bankruptcy term has been reduced to 1 year after which the debtor is free of his debts. A debtor must have secured and unsecured debts of over €20,000.00 and be insolvent. Secured debts will be attended to first and if there are any funds left after the secured debts are paid, it will be divided between the unsecured creditors. In reality, unsecured creditors are at the bottom of the list and should not expect to recover any money.
Bad debts are an inevitable aspect of any business and the Personal Insolvency Act has given debtors more options when dealing with creditors. The most important thing for any business is to have a strategy in place to deal with debts before they build up and jeopardise your livelihood. Act quickly, make early demands and keep the lines of communication with the debtors open. There is no point throwing good money after bad so learn to prioritise debts where you have hope of recovering your money.
