First Debt Settlement Arrangement accepted by Creditors
Monday November 25th 2013 will be long remembered in Ireland as the date when the first Debt Settlement Arrangement or DSA to be proposed by a debtor was accepted by creditors. The debtor can now begin to move on with his life after at least 65% of his creditors agreed to write off a substantial percentage of his debts in return for the debtor agreeing to contribute his surplus income to a fund for the benefit of creditors for a period of five years under the supervision of a Personal Insolvency Practitioner or PIP.
The PIP who assisted the debtor in formulating and putting forward the DSA for the consideration of creditors was Ronan Duffy of the firm of McCambridge Duffy which has offices in Derry and Donegal and has been specializing in the insolvency business for twenty five years, mainly in the Northern Ireland and UK markets. Mr Duffy’s experience and expertise in personal insolvency was a significant factor in getting over the line with this first DSA.
Mr Duffy and his team undertook a significant amount of preparatory work leading up to this red letter day. After initial contact was made by the debtor, the team quickly got to know him and commenced the process of establishing whether his financial circumstances met the criteria for a DSA or for one of the other insolvency solutions available under the new legislation. The process involved gathering verification evidence, preparing a file, liaising with the Insolvency Service of Ireland or ISI, preparing a Prescribed Financial Statement or PFS and applying to court for a Protective Certificate or PC.
To the great relief of the team not to mention the debtor, the PC was granted in Monaghan Court on 21st October 2013 giving the debtor a period of seventy days when he would be protected from any legal action or other enforcement actions by his creditors. Following this the team commenced intensive engagement with creditors culminating in the production of a quality DSA proposal together with all necessary supporting documents and notices. A formal Meeting of Creditors or MOC was convened on 25th November 2013 a mere five weeks after the court had issued the PC. The DSA was accepted by creditors at the MOC and while it is believed that agreement was not unanimous, there was enough support for the proposal to get over the necessary 65% acceptance threshold.
Mr Duffy did not disclose the amount of debt to be written off which the DSA proposal entailed, stating that this was a private matter as between the debtor and his creditors. However he recognized the significance of the occasion and attributed the successful outcome of the MOC to the debtor’s full and frank disclosure of his financial circumstances and to his willingness to address his problems under the terms of his DSA proposal which it is understood will last for five years after which the debtor will be debt free. He will be repaying what he can afford for that period and Mr Duffy stated that people should be aware that the amount to be repaid would vary from one case to another and would be based on the debtor’s income and any assets he or she might have.
When asked what would be the most important factors for successful implementation of the new insolvency regime, Mr Duffy emphasised the importance of well constructed realistic proposals, openness and frankness in the disclosure of financial circumstances, realistic expectations on the part of both the debtor and creditors and good communications and trust between all parties. He felt that pre-proposal interaction between creditors and the PIP would be the key to successful outcomes.
Article written by: Paddy Byrne