Case studies: different ways out of debt


Debt Relief Notice:Seán is married with two children and recently lost his job. The family live in rented accommodation and his only income is social welfare. While working he built up €14,000 in debt with three credit card providers. He also owes €4,500 to gas and electricity providers.

After paying essentials such as food and rent, Seán has just €53 left a month. Subject to Seán signing a declaration that the facts outlined are correct, he can apply for a Debt Relief Notice (DRN) from a recognised intermediary, who will send the required documents to the Insolvency Service for approval. The Insolvency Service will then issue a DRN and a three-year moratorium period will apply, during which none of the creditors can pursue Seán for debt repayment. After three years, if Seán has adhered to the debt relief process and has contributed accordingly, the debt will be written off and he will be debt free.

Debt Settlement Arrangement

Niamh, a single mother with one child, is a 37-year-old contract agency nurse. She lives in rented accommodation in Drogheda and has a 2006 Ford Focus to commute to work in Beaumont Hospital.

She has no other assets. After paying essential expenses, she has €250 a month left from her salary. Niamh has a credit union loan of €9,000 along with a personal loan of €23,000. The combined monthly interest on her debts is €300. A Personal Insolvency Practitioner will review her circumstances and €250 will be ring-fenced to pay her liabilities. A proposal will be sent to her creditors.

If 65 per cent of the creditors approve the proposal, then the Debt Settlement Arrangement (DSA) will be binding to all creditors. The DSA will last for five years. Subject to Niamh complying, Niamh’s payments will be deemed to be in full and final settlement of all her debts. She will be debt free.

Personal Insolvency Arrangement

Brendan is a 43-year-old engineer on a gross salary of €82,000. He has unsecured debt of €38,000 arising from a personal loan and credit cards.

Brendan bought a house 10 years ago and, while it is now worth €300,000, he has a mortgage of €340,000. He used the equity to buy an investment property in Navan, which he rents out. After tax, he has €5,000 to live on, but his outgoings, including household bills and mortgage repayments, are €7,000.

His debts, which are subject to the Personal Insolvency Arrangement (PIA), amount to €248,000 and include a €210,000 mortgage writedown. A Personal Insolvency Practitioner proposes that Brendan contribute €2,000 a month to his creditors for six years.

This equates to €144,000 and results in the creditors recovering just over 50 per cent of their debt. At the end of the six-year period, Brendan exits his PIA debt free, except for his mortgage and investment property which are now performing loans.