Debt Relief Notices – What are they and how do I apply?

Colette Bennett, Project Development Manager, Approved Intermediary Service Transition Unit, MABS ndl

Disclaimer

This presentation is for information purposes only It is not intended as training or legal / financial advice.

If you require advice in relation to your specific circumstances, please contact MABS, FLAC or a

suitable alternative.

Presentation Outline

• What is a Debt Relief Notice?

• How will I know if I’m eligible?

• What are the effects of a Debt Relief Notice?

• How do I apply?

Debt Relief Notices• What are they?• Provided for by the Personal Insolvency Act,

2012• Debtors with low levels of debt, assets and

disposable income• Subject to a 3 year supervision period – write

off at the end• Applied for through an Approved

Intermediary

Debt Relief Notices - Eligibility

• Three “headline” criteria• Debt Levels• Asset Levels• Net Disposable Income

• And “Other”• Require a little more discussion to

determine

Debt Levels

• Qualifying Debt of €20,000 or less• Includes personal loans, credit cards,

credit union loans, store cards etc.

• Does not include Excluded Debts

• May include Excludable Debts

Debt Levels• Excluded Debts• Domestic support orders • Debts arising from personal injury /

wrongful death claims • Loans obtained through fraud /

embezzlement • Court fines for criminal offences / Court

Orders under the Proceeds of Crime Acts

Debt Levels• Excludable Debts• Taxes / duties / levies or other charges owed to the

State• Local Government Charges• Household Charge• Local Authority Rates• Debts due under the Nursing Home Support Scheme• Management Service Charges• Debts due under the Social Welfare Consolidation Act

Debt Levels - ExampleJohn has €32,000 worth of debt, as follows:•€12,500 owed to credit card companies•€ 4,500 owed to legal moneylenders•€ 9,000 owed to the Revenue Commissioners•€ 6,000 owed in arrears of maintenance payments

What are his qualifying debts?

Asset Thresholds• General - €400• Exceptions:• Car - €2,000 • One item of jewellery - €750• Household Goods / Tools of Trade - €6,000• Books / Equipment needed for primary /

secondary education• Interest in a pension

Net Disposable Income• €60 per month• Statutory Calculation:• Income (excl. Child Benefit)• LESS Reasonable Living

Expenses• LESS tax, PRSI, USC, levies• LESS payments to excluded

debts• LESS payments to excludable

debts

Net Disposable Income - ExampleJane is a shop assistant earning €1,200 per month after tax etc. She lives alone and has no car. She shares a house near work and pays rent of €200 per month.According to the ISI Guidelines her Reasonable Living Expenses are €900.08 plus reasonable housing costs. She has a debt to the Department of Social Protection and pays €100 per month to this.What happens if this debt is permitted?

Net Disposable Income - Example

DoSP Debt not included

Income €1,200.00LESS RLEs €1,100.08LESS DoSP € 100.00

Net Disposable Income

-€0.08c

DoSP Debt included

Income €1,200.00Less RLEs €1,100.08

Net Disposable Income

€99.92

Other Criteria• Domiciliary Condition• Likelihood of solvency in next 3 years• Preferences and Dispositions• When were the debts taken out?• Other Arrangements under the Act• Bankruptcy

What are the effects / consequences of a Debt Relief Notice?Debtor•3 year supervision period•Protection from creditors•Change in circumstances•Increase in income - €400+•Lump sum / gift - €500+•Disclosure requirement on borrowing >€650•Public Register

Creditor•Cannot start or continue legal proceedings•No debt collection action•Cannot enforce a judgment•Cannot recover goods•Cannot request payment•Cannot terminate an agreement•Right to object

Offences• False representation• Failure to comply with obligations under a

Debt Relief Notice• Concealing or falsifying documentation• Fraudulently disposing of property• Obtaining credit in excess of threshold

without disclosing arrangement• Unauthorised person acting as authorised

intermediary or PIP

How do I apply?• Through an Approved Intermediary – MABS• Provide documents to support your application

before first meeting• Meet with your Approved Intermediary (AI) to

discuss options• If applicable, AI will request consent of

Excludable Creditors • Complete a Prescribed Financial Statement• Swear Affidavit

How do I apply?

• Approved Intermediary will process the application and send to the Insolvency Service of Ireland (ISI)

• ISI will review and send to the Circuit Court• Circuit Court will either approve the

application or reject it

How do I apply?

What happens next?• If successful – debtor is subject to the

supervision period (3 years)• AI will send the debtor’s file to the ISI• If debtor has further queries, contact the ISI• If debtor keeps to the terms of the Debt Relief

Notice, any outstanding balance will be written off at the end of the supervision period

• Details removed from Register within 3 months

Summary• Option of last resort – not a solution for

everyone• Applied for through Approved Intermediaries• Debtor must have low levels of qualifying debt,

assets and net disposable income• Strict eligibility criteria• 3 year supervision period – debtor and

creditor obligations• Discharge from debt at end

Thank You