Interlocking (Joint) Personal Insolvency Arrangements – A Brief Guide
PIAs tend to be considered on an individual basis, but more often than not there is another person to consider in the arrangement – a spouse or a civil partner. What happens when you want a PIA and your finances are entwined with someone else’s – what happens to them and what if they have bad debts of their own?
Joint PIAs do not exist, even if you both share a joint bank account and other financial commitments, but the Personal Insolvency Law 2012 has provided for the possible circumstances arising where both partners need considerable financial help if they are both insolvent. These are called interlocking PIAs.
Interlocking PIAs allow people who share their finances through a common financial statement to approach their PIAs in a slightly different way – that is both separately and jointly.
The two people must individually be able to satisfy the criteria for applying for a PIA in all general respects such as:
- They are employed or self-employed
- They have lived in the Republic of Ireland for at least the last 12 months
- They have at least one secured debt attached to Irish property or assets
- They owe more than €20,000 in unsecured debt
- They owe less than €3million in secured debt
- It is their first PIA
However in addition to these they should be able to demonstrate:
Each person should have their own unsecured and secured debt. If one person only has the secured debt they would not be eligible for a PIA and therefore not eligible for interlocking PIAs.
The financial relationship the two people have should help, not hinder, the PIA process. The two PIAs should dovetail together and support each other for ease of administration.
Ideally if the two individuals own a joint property, then both of them should have undergone the process for cooperating with their mortgage lender for six months prior to agreeing that a resolution for the arrears cannot be found.
Sometimes a person may deliberately try and incur debts as quickly as possible to meet the eligibility criteria and get away from a stressful debt situation.
Occasionally a spouse or partner may try to help the other by quickly accumulating debt so they can be eligible for interlocking PIAs and carry some of the burden. Either scenario would not be allowed. Each person must meeting the criteria for a PIA individually before they can consider interlocking PIAs. Making yourself deliberately insolvent is frowned upon.
Once the eligibility criteria of both of the individuals has been proved, the PIP will send off all the paperwork for both to the ISI and Circuit Court to be granted Protective Certificates. If the Circuit Court is happy with everything, they will grant the Protective Certificates. It is then down to the PIP to put together a PIA proposal for both people individually which interlock.
Ideally the proposal should recognise the financial dependence and independence of the couple, and be attractive to creditors at the same time. However, things could come unstuck if one individual does not get approval from their creditors, which is why it is important that both PIAs can stand alone on their own merits. If one PIA fails it should not take down the other person’s PIA.
Creditors may favour interlocking PIAs as they often view them as more stable and less likely to fail? Why? Because the couple are more likely to succeed when they are both involved in the process and supporting one another through the six year term of the PIA.
To find out more about joint or interlocking PIAs, call and speak to one of our experienced PIA Advisers now on 0800 193 1024.