Since the Insolvency Service of Ireland (ISI) was established in the post-crash year of 2013, there was an overdue need for proper regulation around handling of debtors and arrears.
Lubricated by the hubris of developers, aided by overly-generous banks, the legacy issues are still being managed, and conflicting requirements of keeping those in unsustainable debt in their over-mortgaged homes clashed with a public appetite to see those responsible pay for the damage inflicted.
Recent revelations that AIB – a bank nationalised following the crash – had agreed a deal for former hurler DJ Carey writing off debts of over €9m was the latest in a series of headline-grabbing deals for high-profile figures over the years. Millions here, millions there, it seems a line-up of the rich and famous had their debts forgiven while small borrowers were hounded for owing a few thousand.
But in reality, similar deals are available to anyone who qualifies for them, via the mechanisms laid down in the ISI’s insolvency measures. For unsecured debts, like credit cards or car loans, the average write-down is 99pc. For secured debt – business and personal - it’s 65pc, according to AIB’s contribution at last week’s Oireachtas hearing.
For unsecured debts, like credit cards or car loans, the average write-down is 99pc
But how do the ISI measures work, and how can you get a deal on your debt?
The Insolvency Service is a good news story. To date from 16,466 applications, 10,032 people have arrangements (see panel below) with personal insolvency arrangements (PIAs) accounting for some 70pc. PIAs deal with debtors who have mortgage arrears.
In just one quarter of 2022, over €222m was handled, mainly on homes (40pc) and buy-to-lets (30pc).
There is no typical applicant: 38pc are aged 45-54, while 14pc are over 65. Two thirds are married. The male/female split is 50:50. While 42pc work in the private sector. Some 13pc are self employed and one in four are unemployed.
There are 166 registered financial professionals dealing with cases, mostly personal insolvency practitioners (PIPs).
The real story lies in the figures for bankruptcy. While 448 were made bankrupt in 2014, the year after the launch of the ISI, last year just 72 were forced down that path.
In over 95pc of cases, the family gets to stay in their own home irrespective of the arrangements made. Neighbours don’t know, kids stay in school and nobody is any the wiser, except the individuals themselves.
In over 95pc of cases, the family gets to stay in their own home
Yes, they’re living in more straitened circumstances – there is a time-bound overseen spending period – but as PIP Mitchell O’Brien says, “sheer relief” at the letters, calls and bills ceasing is the most palpable feeling, not the shame, embarrassment or stress, which have dogged many for years.
Debt write-off
Write-offs are based on the debt and income of the applicant. If considered uncollectable debt, then there’s no point flogging a dead horse. The sooner creditors come to that realisation, the quicker things go for everyone.
AIB claimed, following its headline-grabbing revelations, that there are “no special deals for special individuals”, and certainly under the public ISI process that is absolutely correct.
Write-offs are based on the debt and income of the applicant
Debt is a leveller. So, whether you’re in hock for €100 or €10,000,000, it increasingly becomes the bank’s problem, rather than their borrower’s.
There were eyebrows raised however, at the news that for more than 1,900 AIB customers since 2015, the debt write-down was over 90pc.
How it works
The first step is a phone call. The Money Advice and Budgeting Service (Mabs) is the portal for debtors (mabs.ie, 0818 072000) and it’s worth taking a look through its step-by-step guides and real case studies.
The ISI is at www.backontrack.ie which is very easy to navigate. Or freetext GETHELP to 50015, or call 01 7644200.
They’ll put you in touch with a PIP – the panel is listed by county – and there is a free voucher scheme for many applicants so you don’t have to pay if you meet the conditions of being in mortgage arrears, insolvent, at risk of losing your home and ‘reasonably accommodated’.
Mabs says this means “if you are not one person living in a four-bed house, or if five people are living in a two-bed house, as set out in Section 104 of the Personal Insolvency Act 2012”.
They aim to keep you in a suitable house, preferably your own, assess your debts, income and ability to service loans into the future and write-off what you cannot.
Standard Financial Statement
The SFS is the document listing your income, assets and expenditure which is mandatory and ongoing during the debt arrangements.
It shows how much you can pay to service debt, and what reasonable living expenses you need. It is very fair, especially when most debtors have spent years juggling their finances.
However, I think it is a great thing for everyone to complete. It is a bit long at 11 pages, but straightforward, and works brilliantly as a budget planner, even if you’re not in debt.
You can find it on centralbank.ie or google SFS.
Debt solutions
There are four debt solutions. The one you get will depend on your circumstances.
Debt Relief Notice
The most basic kind, for those with unsecured debts (credit card, credit union loan, overdrafts etc) under €35,000, very low income (under €60 per month after immediate needs are met) and no assets to speak of. It is unlikely their financial position will improve in the next three years. They are likely to get a full write-off. Handled through Mabs.
Debt Settlement Arrangement
No maximum debt level, but it must be unsecured only (ie not mortgages). Agreed write-off, after you agree to pay a percentage of your earnings toward the remainder for a number of years. Requires a PIP.
Personal Insolvency Arrangement
Secured, and unsecured debt, no maximum. Agreed living expenses, stay in home where possible, write-down of unsupportable debt following an agreed period (typically five to six years). Requires a PIP.
Bankruptcy
Debts up to €3m, unless higher agreed by creditors, including business loans. Other options have failed; your assets and property are assigned to a court appointee for sale. You may lose your home, but it is not a given. If seeking credit, you must disclose you are bankrupt. Discharge after one year. Requires High Court application.
