The burden of debt can have a devastating impact on individuals, affecting their mental and physical health, relationships, and overall quality of life. For one sales assistant, the weight of over €1.1 million in debt due to personal guarantees he had signed for a construction company that went into liquidation in 2008 had become unbearable.
However, with the assistance of a Personal Insolvency Practitioner (PIP), he was able to enter into the insolvency process and obtain a Personal Insolvency Arrangement (PIA) that ultimately resulted in the majority of his debt being written off, with just €900 going to creditors.
The PIA, which was initially refused by the Circuit Court but later approved by the High Court, is a 13-month duration plan that allows the sales assistant to retain his family home while paying a lump sum of €3,000 towards the debt.
Unsecured debts of just over €1 million owed to parties including the Bank of Ireland, Chadwicks Group, and Ganleys Hardware, will be written off, and the mortgage on his family home will be restructured.
The case highlights the importance of seeking professional advice and assistance when facing insurmountable debt, as it can provide individuals with a path towards financial stability and a brighter future.
Background Information
Having signed personal guarantees for a construction company that went into liquidation in 2008, the sales assistant had over €1.1 million of debt written off and obtained the services of a Personal Insolvency Practitioner (PIP) to put together a Personal Insolvency Arrangement (PIA), following several judgments obtained against him.
The PIA, which was initially refused by the Circuit Court, was eventually approved by the High Court and is set to last for 13 months.
The sales assistant’s debt situation is not uncommon in Ireland, where personal guarantees are often required by banks and other lenders for business loans. In the event of the business failing, the guarantor is personally liable for the loan, which can result in severe financial consequences.
The insolvency process provides a means for individuals to address their debt situation and work towards a resolution that is beneficial for both themselves and their creditors.
Insolvency Process
The individual in question entered into the insolvency process and secured the services of a Personal Insolvency Practitioner (PIP) who developed a Personal Insolvency Arrangement (PIA). The PIA was initially rejected by the Circuit Court but was later approved by the High Court. The PIA is set to run for a duration of 13 months.
To provide further context, below is a list of four key items related to the insolvency process:
- The individual obtained the services of a PIP who developed a PIA to address their debts.
- The PIA was initially rejected by the Circuit Court but was approved by the High Court.
- The PIA will run for a period of 13 months.
- The PIA offers a more favorable outcome to creditors than if the individual had been adjudicated bankrupt.
Debt Restructuring
The Personal Insolvency Arrangement (PIA) includes a restructuring of the mortgage on the individual’s family home, where a portion of the debt will be written off, and the remainder will be repaid over a period of 20 years. Specifically, over €110,000 of what is owed on the mortgage will be written off, and the remaining amount will be paid back in monthly installments over the next 240 months.
This debt restructuring is a significant component of the PIA and will allow the individual to retain their family home while also making progress towards repaying their debts.
In addition to the mortgage restructuring, the PIA will also see unsecured debts of just over €1 million written off, owed to parties including the Bank of Ireland, Chadwicks Group, and Ganleys Hardware.
The individual will make a lump sum payment of €3,000 towards the PIA, and any proceeds from the sale of assets such as an apartment and sites of land will go towards repaying creditors.
Overall, the debt restructuring and write-offs included in the PIA will provide a feasible path towards debt relief for the individual, while also ensuring that creditors receive a portion of what they are owed.
Assets Sold
The individual sold various assets, including an apartment and sites of land, to repay their debts as part of the Personal Insolvency Arrangement (PIA). The proceeds from these sales are to go towards repaying the individual’s creditors. This step was necessary due to the high amount of debt owed by the individual, which was over €1.1 million.
By selling these assets, the individual was able to make a significant contribution towards the repayment of their debts, which contributed to the approval of the PIA by the High Court. The sale of assets is a common feature of insolvency proceedings, as it allows individuals to repay their debts while also minimizing the impact on their personal and professional lives.
In this case, the individual was able to retain their family home while still making a significant repayment towards their debts. The PIA allowed for the restructuring of the individual’s mortgage, with over €110,000 of what was owed being written off. The remainder will be repaid over a period of 240 months (20 years).
Overall, the sale of assets was a necessary step towards the resolution of the individual’s financial difficulties and the approval of the PIA by the High Court.
Comparison to Bankruptcy
Comparing the proposed Personal Insolvency Arrangement (PIA) to bankruptcy, the creditors would have a better outcome under the former. This is because in bankruptcy, the debtor’s assets are liquidated to pay off the creditors, but often the proceeds are not enough to cover the full debt owed.
In contrast, under the PIA, the debtor retains some assets while also making a lump sum payment and restructuring the remaining debt. This means that the creditors receive a higher percentage of the debt owed to them, and the debtor is given a chance to repay their debt in a manageable way.
However, it is important to note that while the creditors may prefer the PIA over bankruptcy, it is not necessarily a perfect solution. The debtor still has to make significant payments towards their debt over a long period of time, and may have to sell off some of their assets. Additionally, the PIA may not be available or feasible for all debtors.
Sub-list 1:
- Pros:
- Creditors receive a higher percentage of the debt owed
- Debtor retains some assets
- Debtor has a chance to repay their debt in a manageable way
Sub-list 2:
- Cons:
- Debtor still has to make significant payments over a long period of time
- Debtor may have to sell off some of their assets
- The PIA may not be available or feasible for all debtors
