RSM Farrell Grant Sparks Personal Insolvency Act 2012

14th May 2013

Personal Insolvency Act 2012

2

Insolvent?

3

< €20k

4

> €20k

5

Bankruptcy

6

Case Study – PIA Applicant

7

• First Step – ASKING FOR HELP!

• Meeting :Be Honest, Be Open and Be Prepared

• Cost ; Commitment & Credibility

Case Study – PIA Applicant

8

• Sean is a 50 year old Sales Manager who earns a monthly net income of €3,050.

• Married, 2 Children & wife does not take employment outside of the home.

• Has no secured Debt other than his family home.

• We assume he meets the eligibility criteria & agrees with the Insolvency Advisor’s proposed Personal Insolvency Arrangement (‘PIA’) solution.

Case Study – Sean’s Current Position – Assets & Debts

9

• Sean’s loans are more than all the assets he holds:

Assets & Debts

Assets Bank Valuation Debt Equity

Home Bank 1 €180,000 €400,000 (€220,000)

3 acres of Land - €19,500 €19,500

Car - €6,500 €6,500

Personal Loan Bank 2 €35,000 (€35,000)

Credit Card Bank 1 €6,500 (€6,500)

€206,000 €441,500 (€235,500)

Case Study – Sean’s Current Position – Income

10

• Sean’s income is not able to meet his debts & run his household based on the minimum guidelines.

Income

Net Monthly Income €3,050

Expenses (where applicable)

Cost of Living (€1,689)

Mortgage (€2,860)-

Reasonable Living Expenses incl. Mortgage (€4,549)

Case Study - Sean - Proposed PIA Solution

11

• Sean’s Income after reasonable household spending allows a max repayment of €1,361 p.m. with the sale of land used to clear 6% of the outstanding unsecured debt. Monthly Income Assessment under Proposed Solution Dividend %

Income

Net Monthly Income €3,050

Net proceeds from land sale €15,600

Total Income Available €3,050 €15,600

Expenses (where applicable)

Reasonable Living Expenses (€1,689)

Mortgage - restructured (€1,361)

Reasonable Living Expenses (€3,050)

PIP Fees (€3,000)

Bank 1-Unsecured Lump Sum Payments (€10,468) 6%

Bank 2-Unsecured Lump Sum Payments (€2,132) 6%

Net Income - -

Case Study - Sean - Proposed PIA Solution

12

• To do this, the Advisor increased Sean’s loan by 5 years i.e. until he retires & can now repay a maximum mortgage loan of €235k.

• Creditors have agreed to not seek sale of the car and once the land is sold, Sean has no further means to meet any loans other than his mortgage meaning these debts will be written off following ISI agreement to the PIA.

Assets & Debts under Proposed Solution

Assets Valuation Revised Debt Unsecured

Home(Revised Debt) Bank 1 €180,000 (€234,671)

Home (Unsecured Debt) Bank 1 - (€165,329)

Car - €6,500

Personal Bank 2 (€35,000)

Credit Card Bank 1 (€6,500)

(€206,829)

Available for Unsecured Debt from sale of land after PIP fees €12,600

Debt Written off as part of the Arrangement (€194,229)

Return to Solvency - Revised Debt €186,500 (€234,671)

Sean - Summary

13

• SUMMARY

• NEXT STEP:

• Have a look at the ISI website – a number of very good case studies that might suit your particular situation & we will also be taking Q’s later.

• FINALLY REMEMBER – “this too, shall pass”.

About RSM Farrell Grant Sparks

• Three office locations – Dublin, Longford and Belfast

• 30 years in business in Ireland

• 26 partners and over 200 staff

• Ranked 7th in league of Irish accountancy firms

• International reach and capabilities - independent member firm of RSM International

• Profile: “The annual FINANCE Accountancy Survey ranked RSM Farrell Grant Sparks as the most efficient accountancy firm in Ireland.” (source: Finance Magazine)

About RSM International

• 6th largest network of individually owned and managed accounting and consulting firms in the world

• Internationally more than 32,500 staff including 3,000 partners

• Over 700 offices worldwide in over 90 countries

14

For further information about RSM Farrell Grant Sparks please visit our website:  

www.rsmfarrellgrantsparks.ie 

RSM Farrell Grant Sparks

Molyneux HouseBride StreetDublin 8Ireland T +353 (0) 1 418 2000 F +353 (0) 1 418 2044E dublin@rsmfgs.ie

Church StreetLongfordCo LongfordIreland T +353 (0) 43 334 1900 F +353 (0) 43 334 1754E longford@rsmfgs.ie

RSM McClure Watters

Number One Lanyon Quay Belfast BT1 3LGNorthern Ireland T +44 (0)28 9023 4343 F +44 (0)28 9043 9077E office@rsmmcw.com

Registered to carry on audit work and authorised to carry on investment business by the Institute of Chartered Accountants in Ireland (ICAI). Chartered Accountants Ireland is the operating name of ICAI. RSM Farrell Grant Sparks is a member of the RSM International network. The RSM International network is a network of independent accounting and consulting firms each of which practices in its own right. RSM International is the brand used by the network which is not itself a separate legal entity in any jurisdiction. © RSM Farrell Grant Sparks 2011

15