Brought to you by the Insolvency Service of Ireland.
So, you may remember the opportunity many of you took two weeks ago to have your questions answered through our Ask the Money Experts Q&A.
Our readers asked about everything do to with mortgage repayments, loans, credit card debt – and all of those anonymous queries were then analysed by specialists in the field. So, let’s not wait any longer! Here are the solutions to your money troubles.
Answers 1-3 provided by Eugene McDarby from UHY Insolvency.
Q1. I have €2900 credit card debt that I’m unable to repay. What would be the best solution and how do I know if I am insolvent?
Contact the credit card company and let them know your situation. Request in writing that they cancel the card and freeze all interest and charges. Agree an affordable monthly amount until the debt is cleared. If you can get a small lump sum they may offer you a full and final settlement. You should also check your Insolvency options on the Back on Track website.
Q2. I am behind on my mortgage repayments and keep getting letters from my bank about repossession. I think it’s too late to save my home and I’m tempted to hand back the keys. Will this solve my problem?
Leaving the property and giving back the keys is not actually a solution, as you remain the legal owner of the property and are still liable to repay the mortgage until either repossession; voluntary sale or voluntary surrender of your property is completed. If the property is sold for less than the amount you owe, you could still owe your lender for the remaining debt.
Even if you have received letters stating that your mortgage is unsustainable; or threatening repossession; or a court appearance date, it’s still not too late to sort out your finances and keep your home. I recommend you talk to a Personal Insolvency Practitioner (PIP) who will advise you of your options. It sounds like you could be eligible for a free PIP consultation under Abhaile, the State-funded scheme set up to help people with mortgage arrears to access advice. A list of PIPs participating in the scheme is available on Back on Track.
Q3. What is a credit rating and what does it mean to have a bad one?
The Irish Credit Bureau is an electronic library or database that contains information on the performance of credit agreements between financial institutions (i.e. banks and building societies) and borrowers. Typically, the borrower’s payment profile history is reported over a 24-month repayment period.
If a person misses payments, they will be reported on the bureau, and then when they go to borrow they may get a refusal based on the condition of your credit report. Information is held for five years after a credit agreement is closed. You can address your debt through the Insolvency process, or try to repair your credit rating by starting to pay back the debts in full.
Answers 4-6 provided by Tara Cheevers from ACO Financial & Business Solutions Ltd.
Q4. I have credit card debt of €7000 and a personal loan of €12,000, I don’t have a mortgage and I am unemployed. How can I clear this debt?
Where your debts are less than €35,000 you could be eligible for a DRN – A Debt Relief Notice. The other eligibility criteria for a DRN is that you don’t have a mortgage or own property or a large asset and you have €60 or less left after your reasonable living expenses per month. Given that you are unemployed and in receipt of social welfare payments which I assume are €188 per week, you would not have in excess of €60 per month.
An Approved Intermediary (AI) can assist you with your application for a DRN. AI’s are based in some of the MABS offices throughout the country, if you contact your local MABS office they can assist you to arrange an appointment with an AI. Visit Back on Track for more information.
Q5. What are ‘reasonable living expenses’? If I get an insolvency arrangement, does the ISI tell me what I can and cannot spend on day to day living expenses?
Reasonable Living Expenses (RLE) are day-to-day living costs, which you would incur in order to maintain a reasonable standard of living. The RLEs are based on the makeup of your family. For a single adult with no children and with a car the allowance for day to day RLE would be €1,050.48 per month.
If you do not have a car then the allowance is €938.14 per month. The RLE allowance would be what you need for your day-to-day living expenses in terms of food, light & heat, clothing, healthcare, phone, travel, insurance and social inclusion/lifestyle costs. If you are paying rent for your living accommodation, then this amount is added to your RLE costs to arrive at your total set costs. The ISI’s RLE calculator is available here.
Q6. How do you avoid seasonal/unforeseen debt? I always manage to pay off the minimum on credit cards, loans etc each month but most months there’s additional debt that builds up, being it a medical expense, unexpected car service, loved ones birthday, wedding etc. I feel my debt is continuously sneaking up and although I’m paying off the minimum required I fear its building month on month and it will come to a point where I can’t meet the minimum repayments.
It is difficult to fully answer your questions as I do not know what your actual debts are. However, if you are only managing the minimum payment on your credit cards and loans, this would suggest that you are only ever able to manage the minimum payment and therefore are never actually clearing the debt.
It is possible that you are insolvent i.e. unable to pay your debts in full as they fall due. If this is the case, you should talk to a Personal Insolvency Practitioner (PIP). If you are not sure if you are insolvent, I would recommend you arrange a meeting with MABS to get assistance with planning and budgeting to assist you with the debt repayments or indeed to assist you to negotiation with your creditor card and loan providers to possibly reduce the monthly repayments you are making and to put a plan in place in order to get this debt cleared over a set time period. MABS can assist you with budgeting and can advices you also of what other options may be available to you for dealing with your debt problems.
Answers 7-9 provided by Mitchell O’Brien from Insolveny Resolution Service.
Q7. If I’m in debt now but get it cleared will this be visible on my “records” in the future if I’m looking to get some form of loan or mortgage?
There are two points to consider in replying to this question:
a) If you currently have debts that you are unable to repay, then your credit record is already damaged (but not beyond repair). Until your current debt is addressed by either repaying it in full, or by having an amount of it written-off in a Personal Insolvency Arrangement (PIA) or Debt Settlement Arrangement (DSA), you won’t have started the process of repairing your credit rating.
b) Your creditors (those that you owe money to) are probably reporting your non-payments or part payments to the Irish Credit Bureau (ICB) each month. Your creditors (financial institutions) are legally obliged to keep the ICB updated with your details as they relate to the repayment of your debts. The ICB keeps record of payment histories for a maximum of 6 years. The longer you put off dealing with your unsustainable debts, the longer it will be before your ICB credit record will be rehabilitated.
Q8. Myself and my Husband bought a holiday home in Spain during the boom times but we can barely kept up with payments on our home mortgage. The house in Spain cost €300,000 but is now only worth €160,000 so if we sell it we will be in negative equity. What are our options?
As an Irish resident, a Personal Insolvency Arrangement (PIA) can deal with negative equity and loan arrears in any country in the EU. You should contact a Personal Insolvency Practitioner (PIP) immediately so that you can deal with all of your debts in a holistic manner. For more information about a PIA, visit www.backontrack.ie.
Q9. I hear the bankruptcy term is only a year now, can I go bankrupt to solve my debt problems?
Bankruptcy in Ireland has been made so much easier for someone to go through, but the quid pro quo is that it is harder to get into. The Court needs to be satisfied that your debts wouldn’t be more appropriately dealt with in a Personal Insolvency Arrangement (PIA) or a Debt Settlement Arrangement (DSA). You might find that a PIA or DSA is a better solution for your financial difficulties than Bankruptcy. A Personal Insolvency Practitioner (PIP) will be able to assess your situation and advise you on the appropriate solution for you. I strongly suggest you contact a PIP as soon as possible and start your journey towards sustainable solvency.
Answers 10-11 are provided by John Butler from Cork Insolvency Centre.
Q10. I’m a mature college student with a weekly income of €144 and I’ve gotten myself caught behind with an orthodontic bill around €2500 that I need to pay off but I can’t seem to find the funds to make that happen. Any advice on what I could do and how to do it?
The best solution for you is a Debt Relief Notice as you have unsecured debt with an income of less than €35,000 per annum and are below reasonable living expenses. You should consult an Approved Intermediary to start the process, which once approved will mean that your debt will be written off. Visit www.backontrack.ie for more details.
Q11. What are the benefits of going for an insolvency solution over doing an
informal deal with my bank?
Firstly, when you contact a PIP to see if you can get an Insolvency arrangement, you will be given 70 days protection from your creditors, during which time they cannot contact you – no more unwanted phone calls or letters. An insolvency solution, when passed, is a legally binding solution that cannot be altered by your Creditor unexpectedly at a later date. ISI solutions ensure that you have a reasonable standard of living while you address your debts and that you will be solvent at the end of the process.
Brought to you by the Insolvency Service of Ireland.
For more information visit Back on Track (www.backontrack.ie), or freetext GETHELP to 50015 for a callback.
