How Do You Apply For A Debt Settlement Arrangement?

3rd February 2014

If you’re intending to apply for a Debt Settlement Arrangement you’ll first need to confirm that you’re eligible for this type of debt deal. There are some broad eligibility requirements and some more specific points that you’ll need to meet.

In a broad sense you’ll need to be “insolvent” meaning that you cannot repay your debts when they fall due. This might be obvious if you’re already substantially in arrears, but even if you’re up to date with repayments you may still be technically insolvent if you’re managing the repayments only by getting steadily into more debt.

Your adviser will need to be convinced that completing a DSA will restore you to solvency. If you only have qualifying unsecured debts this might be obvious. If you’re struggling with high mortgage payments and/or negative equity in a home this could be less clear. Finally you’ll have to be able to afford (either through monthly payments from your income or via the voluntary sale of certain assets) to contribute towards the cost of your DSA and repaying a proportion of your debts to your creditors.

More specifically you cannot have taken out more than a quarter of your debts within the past six months, cannot currently be bankrupt or using a DRN or PIA, and must be resident in Ireland (or at least able to prove that you were recently resident here or that it was your main place of business). If you’re eligible for a Debt Settlement Arrangement should you apply for one?

The fact that you can apply for a DSA doesn’t necessarily mean that you should apply for one. This is just one of three new types of personal insolvency “debt deals” and there are also other options such as bankruptcy or informal debt management plans. Each of these options might have different merits and drawbacks according to your personal circumstances. This is why obtaining high quality advice on all of your options is a prerequisite before actually applying to start a Debt Settlement Arrangement.

Such advice can be obtained from a Personal Insolvency Practitioner. They’ll carry out a fact-finding exercise with you that will help them to identify all of the debt relief options that you qualify for and to recommend to you which might be most suitable. If the best option turns out to be a Debt Settlement Arrangement a PIP will be the person that can work with you to make the application.

Once you’ve appointed a Personal Insolvency Practitioner they’ll be in a position to help you to apply for your DSA. This will involve notifying the Insolvency Service of Ireland and your creditors in respect of your proposals. The application process also involves obtaining a “protective certificate” for you to provide protection from your creditors while your PIP tries to negotiate a deal with them for you.

When you apply for Debt Settlement Arrangements the terms of your debt deal are very much under your control. Your PIP will suggest the terms of your proposals to you, but it’s up to you to approve them. Your creditors might request a change to these terms while your PIP is negotiating with them; again it will be up to you whether you’re prepared to amend them. You should be comfortable with any of these terms being discussed during the application process as you’ll potentially be stuck with them for an extended period of time (typically five years) if they’re subsequently agreed.

Applying for a DSA is therefore a process with several stages. The key point is to access great advice from a debt professional at the earliest possible stage. This will ensure that you know whether you qualify for this option, that better alternatives don’t exist and also that when you do eventually apply that you’re proposing terms to your creditors that you’re content to stick to.