Debt Relief Certificates
The Bill (in Part 3) provides, subject to certain conditions, for a Debt Relief Certificate of forgiveness for persons with no assets and no income that are unable to meet qualifying debts totalling not more than €20,000. The purpose is to create an efficient non-judicial means of allowing persons to resolve unmanageable unsecured debt problems. (Similar systems operate in the UK, Northern Ireland and Australia).
With the assistance of an approved intermediary the debtor may apply to the Insolvency Service to certify that the qualifying debts be frozen for one year following which if, the person still cannot pay, the Service will certify that the debt is written off.
General conditions for a DRC
· debtors would have qualifying debts of €20,000 or less;
· debtors will have a net monthly disposable income of €60 or less after provision for “reasonable” living expenses;
· debtors would hold assets (separately or jointly) to the value of €400 or less (one vehicle up to value of €1,200 would be exempt from the asset test);
· debts qualifying for inclusion in a DRC are unsecured debts: e.g. credit card, personal loan, catalogue payments, etc;
· debts that will not qualify for inclusion in a DRC include: secured debt, court fines, and family maintenance payments.
Where a DRC has been granted by the Insolvency Service
· it will be formally registered;
· a further DRC cannot be applied for before 6 years has elapsed;
· a DRC may not be availed of more than twice;
· there is a restriction on the debtor from applying from further credit.
From the Department of Justice briefing papers
What is a Debt Relief Certificate?
The Debt Relief Certificate (DRC) provides for the forgiveness of debt for debtors with no assets and no income who are unable to meet qualifying debts totalling not more than €20,000. The purpose is to create an efficient means, non-judicial, of allowing persons to resolve unmanageable unsecured debt problems.
For example: Lets assume that John has the following unsecured debts which he has difficulty repaying:
Bank overdraft €5,000
Credit card €5,000
Personal Loan €5,000
Store catalogue €2,000
Utilities €1,000
John unfortunately now finds himself unemployed and in receipt of a social welfare payment or that his income has been severely reduced. He has little or no capacity to pay off his debts following the payment of rent and meeting his basic household needs such as food, heat, etc. He lives in rented accommodation and has no assets to dispose of to help pay his debts and he is not in a position to receive assistance from family or friends.
What can John do?
John could now contact an approved intermediary (such as MABS) and request their assistance in completing the application form and statement of affairs for a Debt Relief Certificate. The approved intermediary will advise John on his options regarding his qualifying debts and the implications of entering into a DRC. These implications may be significant in terms of future access to credit of any kind and provision of utility and other services.
If John proceeds with the application, the approved intermediary will request full disclosure of his income and outgoings and any other information required by the Insolvency Service. John must pay a processing fee of (€90) to the approved intermediary prior to the submission of the DRC application.
The authorised intermediary submits the documentation to the Insolvency Service for approval. The Insolvency Service will examine the submitted documentation and if satisfied will issue a Debt Relief Certificate. The Certificate will list the qualifying debts of the debtor on the application date, specify the amount of each debt and the creditor to whom it was owed. The Service then gives a copy of the Certificate to John and records the relevant details on the Insolvency Register.
A 1 year moratorium period during which creditors cannot pursue action against John in respect of the debts covered by the DRC commences on the date of the Certificate’s registration in the Insolvency Register.
At the end of the 1 year moratorium period, John is discharged from the debts listed in the Debt Relief Certificate. John cannot apply for a further DRC before 6 years has elapsed and a DRC may not be availed of more than twice in a lifetime.