PIA Pros and Cons
When you’re struggling with debt and it’s sliding out of control, any solution (such as a personal insolvency agreement or PIA) which seems like it will help rid you of the stress and burden can seem heaven sent. However, sometimes all the worry makes you see only the bigger picture, and you miss some of the detail that could impact on your more than you realise.
What follows is a brief guide to the pros and cons of having a PIA, which you will need to consider before going forward with an application.
Unlike a Debt Settlement Arrangement (DSA), if you have secured debts you can include these in your PIA agreement, including mortgage arrears on your principal private residence, investment property loans and buy-to-let loans. This is in addition to unsecured debts such as personal guarantees, personal loans, Credit Union loans, business or commercial loans and credit card loans.
Prior to your PIA proposal being created, a Protective Certificate will be put into place so your creditors cannot take legal action against you to recover the money you owe. This lasts for 70 days, and during this time your PIP will put together your PIA so it can ‘go live’ (with creditor consent) before the 70 days is up.
Once your PIA is in place your creditors cannot talk to you about any aspect of your debt or PIA. They must contact only your PIP. If they phone your house don’t talk to them, but give them the contact details of your PIP, who will remind them of your Protective Certificate and application for PIA.
From when the Protective Certificate is approved, all charges and interest on your debt cease to be applied. This allows your PIP to make an accurate proposal for payment based on a specific amount of debt.
If you own your own home you will not be required to sell or move out. Likewise if you rent you will not have to move out. However, the only exception to this is if your principal private residence has very large running costs – in this case your PIP may request you move into accomodation that is less of a financial drain.
Where bankruptcy is forbidden in those professions where personal finances are governed by regulatory requirements, a PIA may be an acceptable alternative. These professions would includes accountancy, the legal system, and the fire, police and prison service. Sometimes positions of public office can also have stipulation about personal insolvency in their employment contracts.
The PIA will be set up to ensure the payments are affordable and you can cover your living and household expenses. You will no longer have to struggle to make your debt repayments because they have been set at a much lower monthly amount that fits in after your living expenses have been taken into consideration.
The success of the PIA depends on you making one payment to your PIP every month without fail. However, emergencies sometimes mean that making the payments gets very difficult, so a PIP can arrange a variation as long as they know in good time before you miss a payment. That could be reducing the payments temporarily or even taking a payment holiday entirely if needed, but in the latter case the PIA could be extended beyond 6 years to take account of this.
Unfortunately there is no way to avoid the PIA from affecting your credit rating. However usually you will have already defaulted on some or all of your debt repayments by the time you talk to a PIP, and this will already be recorded on your credit record. The PIA will stay on your credit record for its duration and for a while after you have completed it too.
Despite a variety of debts being eligible to be included in a PIA, there are a number of debts that either cannot be included or will need consent from your creditors. Those that cannot be included are Court-ordered family maintenance payments, Court fines, Court-ordered awards from personal injury or wrongful death claims, and any debts from fraudulent loans. Those that will need consent include local authority rates; local government charges; any money payable to the state; annual service charges to apartment and housing estate management companies; any money owed under the Social Welfare Consolidation Act 2005; payments under the Nursing Home Support Scheme; and household charges.
Your PIA will be entered onto the Register of Personal Insolvency Agreements, which is an electronic public database that can be freely searched. However usually only members of the finance industry look at it for purely business purposes, and it is very unlikely that anyone you know will be looking for your name among the many thousands of others on there. Once you have completed your PIA, your name will be removed from the register by the ISI within 3 months.
Unlike equivalent debt solutions in England, Wales and Scotland you can only have one PIA in your lifetime. Anyone who enters into one must be confident they can get themselves into a financial position where they will not run into serious debt again, as they will not receive any state-backed help in the form of a PIA. In these cases there may be other debt solutions that can be considered, such as a Debt Settlement Agreement, but they may not be entirely suitable for your situation at the time, and could cause more problems than they solve.
Once you have signed your PIA you must not enter into any more credit agreements for more than 650 EUROs with any organisation without telling the creditor you are in a PIA. However, as your PIA appears on your credit record with the Irish Credit Bureau or Central Credit Register it is likely that a search by any organisation will reveal the information anyway.
Having a vehicle is not always possible with a PIA depending on your circumstances. If you live in the city and there are good transport links you may be asked to give up your car and use public transport instead. However, you will not be expected to give up your vehicle if there is no easy way to get to work by public transport or you need it for self-employed business. If you own an expensive car you may be asked to sell it and downsize to a less expensive model so there is more money available to give to creditors.
PIAs can be a lifeline if you think you are on the verge of insolvency, but they have their advantages and disadvantages which together may mean they are not suitable for your circumstances.
For more information on if a PIA is suitable for you, call one of our experienced PIA advisors now on 0800 193 1024.