How the process could work for those drowning in arrears

Charlie Weston

TOM and Mary bought a house at the top of the boom for €400,000 in 2006. But three years ago, Tom lost his job and now gets only occasional work as a plumber. Mary is a homemaker.

They are €30,000 in arrears, are nearly two years behind on their payments and have decided that they can no longer pay the mortgage -- now or in the future. They want to hand back the keys to the bank and walk away.

But they would still owe at least €200,000 as the value of their home has collapsed. They also have other debts.

Tom and Mary would jump at a debt-settlement scheme that operates outside of the courts and takes in mortgage debt.

If a personal-insolvency trustee concludes that their mortgage is unsustainable and that they will never be able to repay it, then he or she will work on a plan to extract them from the mess.

The trustee would seek to get the mortgage lender and the other creditors around the table and see if a deal could be done.

If the majority agree, then a deal could be agreed. The couple would have to give up ownership of the house.

They will have to agree to make some payments to the mortgage lender and other creditors for between five and seven years.

If Tom and Mary keep to the agreement, then after a period of between five and seven years their remaining debt will be written off.