If you are in debt and cannot meet your repayments when they are due, formal debt solutions can be an option. A Debt Settlement Arrangement (DSA) is one of the solutions under Personal Insolvency Act 2012 to help you clear your debt problems over a period of time.
Different debt solutions can affect your life in different ways (for example, they might affect your credit rating, mortgage or savings). You must apply for a DSA through a Personal Insolvency Practitioner who will charge a fee for this service. So it’s always a good idea to contact MABS before you make any big decisions.
Find out how to qualify for a Debt Settlement Arrangement (DSA) and how the process works.
What is a Debt Settlement Arrangement?
The Debt Settlement Arrangement (DSA) process gives debt relief if you:
- Have unsecured debt
- Can afford to make either regular payment or a lump sum payment towards your debts
A DSA can be put in place for up to 5 years and can be extended to 6 years in some cases. Creditors are not allowed to take action against you during this time. This is called the ‘supervision period’.
The length of an arrangement is agreed by all parties involved. It will depend on your personal circumstances and what is being proposed by your Personal Insolvency Practitioner (PIP). This is a person authorised by the Insolvency Services of Ireland (ISI) to support you to apply for a Debt Settlement Arrangement.
The DSA proposal must be agreed by you and then approved at a creditors’ meeting. The proposed DSA will have to get the support of creditors representing at least 65% of the total debt that it covers.
During the term of the DSA, you either make a lump sum payment or make regular payments. The ISI will share this money to your creditors according to the terms of the DSA.
When a DSA is in place, you are entitled to a reasonable standard of living that includes food, clothing, education, health care, special circumstances and a modest allowance for savings. Work out your households reasonable living expenses using the ISI’s reasonable living expenses calculator.
At the end of 5 years, if you keep to the terms of the DSA, the rest of your debts listed in your DSA will be written off. This means that you no longer owe the money.
What happens if my circumstances change?
Your PIP can change your DSA if your circumstances change during the term of your agreement.
Your financial situation gets worse: If you can no longer afford the agreed repayments, your PIP can apply for a change to the arrangement terms.
Your financial situation improves: The terms of the DSA can be changed if your circumstances improve.
You will have a say in any changes made to the arrangement.
Is there a fee for getting a Debt Settlement Arrangement?
You must apply through a Personal Insolvency Practitioner who will charge a fee for this service. There is no set fee for PIPs, but they are expected to clearly tell you their costs and charges before you appoint them.
What debts does a Debt Settlement Arrangement cover?
A Debt Settlement Arrangement mainly covers unsecured debts. It is important to know whether your debts are secured or not.
In general, the following debts are unsecured:
- Utility bill arrears (gas, electricity and so on)
- Rent arrears
- Credit card debt
- Store card debt
- Bank overdrafts
- Unsecured bank loans
If debts like these are added to your mortgage, they become secured debts and you would not be eligible for a DSA.
What debts may and may not be included?
May be included
- Personal loans
- Credit Union loans
- Business/commercial loans
- Credit card loans
- Store cards
- Personal guarantees
May be included with creditor permission (Excludable)
If the creditor is contacted and asked if the debt can be included and doesn’t respond, the creditor is judged to have permitted to it being included.
- Taxes, duties, levies owed or payable to the State
- Local government charges
- Amounts due to the Health Service Executive under the Nursing Home Support Scheme
- Annual service charges to owner’s management companies (apartments and housing estates)
- Liabilities arising under the Social Welfare Consolidation Act 2005
- Local authority rates
- Household charge
May not be included (Excluded)
- Secured debts like a mortgage
- Family maintenance payments under Court orders
- Court fines in respect of criminal offences
- Liabilities arising out of personal injury or wrongful death claims awarded by the Court
- Liabilities arising from loans obtained by fraud
- Other similar debts
Am I eligible for a Debt Settlement Arrangement?
A Debt Settlement Arrangement deals with unsecured debts. There are no minimum or maximum limits on the total amount of debt that can be covered.
To qualify for a DSA you must:
- Have one or more unsecured debts
- Be insolvent (unable to pay your debts in full as they fall due)
- Be unlikely to become solvent in the next 5 years
- Have no more than 25% of your debt built up in the last 6 months
- Live in Ireland
- Not had a DSA before (you can only have one DSA in your lifetime)
- Not had a protective certificate for a DSA in the past year
- Not had a Debt Relief Notice in the past 3 years
- Not had a Personal Insolvency Arrangement in the past 5 years
- Not been involved in bankruptcy in the past 5 years
How do I apply for a Debt Settlement Arrangement?
You must apply for a DSA through a Personal Insolvency Practitioner (PIP).
Call the MABS Helpline on 0818 07 2000, Monday to Friday from 9am to 8pm to check if you’re eligible to apply for a DSA.
You will have to complete a Prescribed Financial Statement (PFS) giving full and honest information about your financial circumstances.
What are the stages of a Debt Settlement Arrangement?
Below is a summary of the stages involved:
|1. Check if you’re eligible||Call the MABS Helpline on 0818 07 2000, Monday to Friday from 9am to 8pm to check if you’re eligible to apply for a DSA.|
|2. Choose a PIP||Choose a PIP from the Register of Personal Insolvency Practitioners published by the Insolvency Service of Ireland (ISI) or call the ISI’s information line 01 764 4200, Monday to Friday from 9am to 6pm.|
|3. Before your PIP consultation||Gather details of your debts, so you can bring these to your PIP consultation.|
|4. PIP consultation||You will meet with the PIP. Your PIP will:
|5. Appoint the PIP to act on your behalf||You will:
|6. PIP applies for protective certificate||Your PIP sends your application to the ISI:
|7. PIP notifies creditors||Your PIP tells each of your creditors the protective certificate is in place and that you intend to make a proposal for a DSA:
|8. The DSA proposal||Your PIP must invite the relevant creditors to make proposals about the way the debts might be dealt with as part of a DSA:
|9. Meeting of creditors||The PIP calls a creditors’ meeting:
|10. Court approves the DSA||If the court is satisfied that all the conditions have been met, it approves the DSA and it comes into effect. The ISI records the DSA in its Register of Debt Settlement Arrangements. If the court does not approve the DSA, you may have to look at another personal insolvency option.|
|11. What next?||You and your PIP will review your DSA at least once a year – see ‘what happens if my circumstances change’ above.|
What are my other options?
A DSA may not suit everyone. If a DSA is not for you, you have other options. Talk to MABS if you need any more information.
Creditors often prefer to come to an arrangement with you to repay debt, without taking legal action and going to Court.
If you have unsecured debts of less than €35,000 and are on a low income and have minimal assets, a DRN might be a more suitable option for a fresh start. A DRN is not suitable if you have a mortgage. Debts are written off after 3 years of supervision and no payments are required unless your circumstances increase above a set amount during the supervision time.
A PIA covers both secured and unsecured debts so may suit if you have a mortgage. There are no maximum limits on your assets, income or unsecured debts but your secured debts must be €3 million or less (unless your creditors allow more).
Bankruptcy is your option of last resort. You must first have tried a DSA or a PIA and you must have more than €20,000 of debt. Bankruptcy normally lasts for 1 year. You should get legal advice if you are considering this option.