Case study of a family breaking free of debt
Published 04/06/2014 | 02:30
MARY and Fred borrowed big during the boom. At the time they had a thriving small business, but the firm has since collapsed and they are in arrears on their mortgage and other debts.
Their income has collapsed and they are living on a reduced income generated from low-paying jobs. They cannot meet their full mortgage and other debt payments.
They borrowed €320,000 to buy their home, but it is only worth €140,000 now. This means they have negative equity of €180,000. They also owe €35,000 in credit union and credit card loans.
The couple have considered bankruptcy, even though there is no guarantee with that process that they will keep their home.
Fred and Mary do not want to spend five years under a restricted household budget as part of a PIA (personal insolvency arrangement).
They can do an accelerated PIA. They will be out of this in three months, and solvent again.
To get the deal over the line the couple has to tap family and friends for €10,000 as a bullet payment.
If they can do that their bank agrees to write €180,000 off the mortgage. The unsecured debt is written down to zero.
Now the couple can meet their reduced mortgage payments. The pair no longer owe money to the credit union and the credit card provider and can rebuild their financial lives.
They will find it hard to borrow money for a number of years, but are at least on the road to economic recovery.