Sunday 17 December 2017

Forget sympathy from banks – and that holiday

SO you want a big chunk of your residential mortgage debt and the buy-to-let loan written off.

But you also want to keep going on a continental holiday and maintain the health cover.

"No dice" will be the message from official new minimum-income guidelines to be issued next week.

The new income guidelines are set to become the standard, whether you are entering one of the new personal insolvency deals or being offered a long-term solution from your bank outside of the personal insolvency process.

The new standards are an attempt to set out what is reasonable for different kinds of family units to live on.

Account will be taken of family type. Those with teenagers will be allowed more to live on than those with younger children, as teens tend to be expensive.

But forcing families to drop health cover could be very controversial.

Almost half the population has health cover, with less than 200,000 people dropping it since 2008, despite one of the most severe economic downturns in living memory.

Those who can make a very good case to the bank may be able to keep their cover, particularly if there is a serious illness in the family.

However, as a general rule, head of the new insolvency service Lorcan O'Connor has taken the view that private health cover is a luxury.

And then there is the second car.

For a family where the husband takes the car to work, because there is no public transport alternative, leaving the wife with no car and young kids in a rural area will not go down well.

On the other hand, who can argue with a family in a debt arrangement being told to skip the foreign holiday for the next six to seven years?

Ross Maguire, senior counsel of the New Beginning support group for distressed mortgage holders, has pointed out that many borrowers still have unreasonable expectations about their living standards. Some people who are in mortgage arrears feel entitled to go skiing.

And remember, that 1.1 million people holidayed in Spain last year.

But deciding that you need a holiday, "because I am worth it" will not cut it any more.

And the strict new guidelines should go a long way to dealing with strategic defaulters – those mortgage holders who can pay but have decided not to in the hope of getting a deal out of the bank.

Only those people who are in genuine distress and who are prepared to go into financial lockdown will secure a deal.

And they will have to fill out a statutory financial statement honestly setting out their income and outgoings.

It will certainly be a tough station. And they should not expect too much sympathy from the banks.

Irish Independent

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