How personal insolvency can prevent repossession of your property

The Personal Insolvency Act 2012 offers essential protections, primarily through Personal Insolvency Arrangements (PIAs), which can halt repossession proceedings and compel creditors to negotiate sustainable solutions.

This article outlines the repossession process, the proactive behaviour of creditors in pursuing repossessions, and how personal insolvency solutions can not only protect against repossession but also help individuals regain control of their finances.

What is repossession and why does it happen?

Repossession occurs when a secured lender reclaims a property due to mortgage arrears. Once arrears exceed 90 days, legal action can commence, often with little consideration for the reasons behind the arrears.

Lenders typically begin by requesting a Standard Financial Statement ("SFS") and may offer Alternative Repayment Arrangements ("ARA"s). However, if no agreement is reached or a borrower is deemed uncooperative, legal proceedings typically ensue.

The process can be subjective, and negotiating with lenders can be overwhelming and stressful, especially when the family home is at risk. Personal insolvency provides a structured way to seek a resolution that involves retaining the family home, with a fully independent Personal Insolvency Practitioner ("PIP") negotiating with your creditors on your behalf.

A Protective Certificate ("PC") stops all legal actions, giving debtors time to formulate a PIA under the guidance of a PIP—even if repossession is already in motion, including cases where a court order granting execution of the Order for Possession ("OFP") has been obtained by the secured creditor.

How a Protective Certificate (PC) stops repossession

Once a PC is issued, creditors must cease all contact, legal actions, and repossession efforts for 70 days while the PC is in place. This legally requires creditors to participate in debt restructuring negotiations. In simple terms, a PC compels creditors to enter restructuring discussions through PIAs, as if an arrangement is approved, all creditors (bar certain exceptions) are bound to it. A deal typically includes solutions such as:

• Term extensions;
• Interest rate reductions;
• Write-offs of negative equity;
• Recapitalised arrears; and,
• Lower monthly payments.

These measures serve to help clients retain their homes and regain financial stability.

Personal Insolvency Arrangements (PIAs): A long-term solution

PIAs are designed to restructure secured debts while settling unsecured debts within the terms of the arrangement, providing a long-term solution for struggling homeowners. According to the Insolvency Service of Ireland "ISI" 2023 annual report, over 1,000 people annually have arrangements approved that result in the successful retention of their homes through PIAs. This report also shows that nearly 70% of PCs lead to successful arrangements, demonstrating the effectiveness of insolvency solutions for those facing financial difficulties.

Additionally, the government-funded 'Abhaile Scheme' covers the cost of an initial PIP consultation, making the process accessible for those in financial distress.

Conclusion: Personal insolvency as a lifeline

With rising arrears and aggressive repossession tactics, homeowners need to be aware of their legal protections. PIAs and PCs not only prevent repossession but also offer a path to long-term debt recovery.

At Grant Thornton Debt Solutions, we specialise in securing Protective Certificates and guiding clients through the insolvency process. If you're facing repossession, we’re here to help.

Contact us

If required, please do not hesitate to contact a member of our specialist team today:

• Ken Gannon – Personal Insolvency Practitioner
• Jennifer O’Brien - Personal Insolvency Practitioner
• Samantha Somers – Debt Advisory Expert
• Christopher Aboud – Debt Advisory Specialist

Or call us at: +353 1 4366 441

Glossary

• Alternative Repayment Arrangement ("ARA"): A temporary or permanent change to the terms of a mortgage to help the borrower manage repayments.
• Execution Order: A legal order that allows the Sheriff to take physical possession of a property after repossession has been granted.
• Non-bank Entity: A financial institution that is not a traditional bank but can offer loans and mortgages. These entities often use more aggressive collection tactics.
• Order of Possession ("OFP"): A court order that grants a financial institution the legal right to repossess a property from the borrower.
• Personal Insolvency Arrangement ("PIA"): A legal mechanism that allows individuals to restructure both secured (e.g., mortgages) and unsecured (e.g., credit cards) debts.
• Personal Insolvency Practitioner ("PIP"): A independent licensed professional who helps individuals with personal insolvency solutions like PIAs, Debt Settlement Arrangements ("DSA"s), or the bankruptcy process.
• Protective Certificate ("PC"): A court-issued document that provides temporary protection (typically 70 days) from creditors while a debtor and their PIP work on a debt restructuring plan.
• Standard Financial Statement ("SFS"): A detailed statement of a borrower’s income, expenses, and debts, used by financial institutions to assess a debtor's financial situation.

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