Normally, I don’t get the chance to put a positive spin on the thorny topic of debt, but the latest Insolvency Service of Ireland (ISI) 2020 Annual Report has some good stuff in it.
First of all, the number of personal insolvency agreements (PIA), down by 3% (only 3%, that is to say due to the congestion of the courts by the pandemic and financial aid government helping people in debt).
An in-depth analysis by Abhaile, the mortgage arrears arm of the Mortgage Advisory and Budgeting Service found that a welcome number of 98% of those who obtained a structured PIA were able to stay in the family home, almost four out of ten getting a reduction in their mortgage debt.
In total, 1,362 debt solutions were put in place and more people (262) came out of bankruptcy than they entered (130).
Having said that, of course, the overwhelming position in coming to the ISI is one of desperation. Debt, arrears, lack of hope, and the accumulation of letters of demand are what usually triggers it.
But according to Tom Murray, a personal insolvency practitioner with Friel Stafford who I spoke to, the stigma and shame associated with seeking financial help when all seems lost, is finally diminishing.
“There is a willingness to face problems and more and more are used to the services available. It takes time for people to accept that their hopes, dreams and expectations are not coming true and that they need help. Some people with their heads in the sand will take longer to get there, but there are solutions. As you see people come out of a creditors’ meeting, you can see the weight lift physically off their shoulders.
He says the system is now much better than the “archaic” process that existed before. “There was only bankruptcy and even then you had to go to court to be officially released; it’s automatic now and there are other solutions, but the real benefit is talking to someone who understands it the first time, the sense of relief from someone who is not emotionally involved, who can bring clarity and the means to guide them. I sometimes feel like a therapist ”.
If he has any advice, it’s this: “Your problem is not going to go away. You have to grasp the thorn to realize that it is not that sharp.
There are four types of debt solutions (see panel below). The main one, which deals with mortgage debt, is the PIA.
According to Abhaile, the first port of call for those in debt, a clearly defined plan begins with a phone call (0761 07 2000) to MABS. They have mortgage arrears and have received legal letters from their bank after the mortgage arrears process has been exhausted.
A voucher is offered for a PIP consultation of an eligible panel (there are more than 80), either a chartered accountant or a notary, who will examine your personal situation free of charge. You have to provide quite a bit of paperwork beforehand, but the result is that your creditors will stop contacting you first (this in itself is a huge relief for families), the PIP will work out a suitable proposal for both parties and send for approval.
If it is not accepted by the creditors, the PIP requests a judicial review called section 115A, the court makes a decision and, if approved, then it is binding on both parties.
The borrower pays what is agreed on all debts for a set period (about 5 years), and any remaining debt is then written off, while the mortgage can be restructured.
When it comes to mortgage debt, banks are forced to look for options to keep people in their homes.
The Irish Mortgage Holders Organization, led by David Hall, which has helped more than 16,000 people through the process, says these include the mortgage for rent (where your house is handed over, but you are there stay as a tenant paying rent), arrears capitalization (where the amount owed is added at the end of the mortgage and paid over a long term), term extension (which reduces monthly payments as you pay off over a longer period of time), reduced interest (lower interest means lower monthly payments over a period of time), and split mortgages (where part of the loan is stored, while you pay off what you can afford for the time being).
In a recent high-profile case, a Kilkenny couple approved for a PIA reached an agreement whereby the term of the mortgage was extended until mid-80, on their very large house, despite the fact that they owed 2.9 million euros to various banks and equity funds. They have agreed to sell other assets they own in order to stay in the house, which is their business as well.
However, most cases involve people with much less means, but the process is the same nonetheless. So, far from leaving people on top or going from day to day, most of those with arrangements find themselves with manageable, structured and friendly terms.
Organization of mortgage holders: mortgageholders.ie
Information for citizens: informationcitoyennes.fr
Debt Relief Notice:
This is the NINJA solution; for those who have no income, no job or assets. On very low incomes (less than € 60 of disposable income), and without a mortgage. It lasts 3 years and all debts are amortized after this period. Executed via Mabs.
Debt Settlement Arrangement:
Unsecured debt (no mortgage), unlimited amount, arranged by a PIP, up to 5 years where as much as is affordable after the cost of living, the debt is repaid with the balance then written off at the end of the Arrangement Period.
Personal Insolvency Arrangement:
For secured (i.e. mortgaged) and unsecured debts up to € 3 million. You agree to repay a percentage of your income as debt after agreeing to the living conditions of a PIP.
After the arrangement (up to 6 years), all remaining unsecured debts are written off and the mortgage restructured where applicable.
A formal High Court arrangement where secured and unsecured debts over € 20,000 are written off. Property and assets are transferred to an official assignee for three years, with excess income being used for debt service.
Released after 1 year, but you must declare that you are bankrupt before applying for a credit greater than € 650.
In any case, PIP may charge for its services, although the fee may be included in the terms of any agreement made. A free voucher is available for the initial consultation.