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New debt deal to help borrowers in trouble on the way

DEBT write-down, split mortgages and longer terms for loans could be part of a new deal for borrowers announced by the Central Bank.

Borrowers in serious mortgage and personal debt have been given fresh hope that new measures to manage debt repayments could ease their problems.

The Central Bank say the aim is to secure deals between mortgage lenders and unsecured lenders such as credit card companies and credit unions.

It is hoped it will alleviate stress for in-debt borrowers who can find themselves being pursued by several lenders.

The facility will operate on a pilot basis from next month and will include a write-down of debts in certain circumstances.

Banks, credit unions and credit card companies will come together with the borrower and the assistance of a third party to determine how debts may be managed.

The lenders would together assess how the borrower would be best place to reduce their loans. This could include reducing the interest owed or the terms of the debt.

Distress

There is no limit to the amount of money owed by a borrower to avail of the scheme.

It is hoped the process would sift through consumers in difficulty and help them avoid the additional costs involved with an insolvency process.

And it is aimed at those in early stage of distress to help them avoid facing bankruptcy or insolvency. The initiative will run for three months with 750 borrowers, who will come from a representative sample of distressed debtors.

"These arrangements are for the most challenging cases and the reduced payments provided are intended for the benefit of the distressed customer and not for the benefit of any other lender," the Bank outlined.

Individuals will be assessed on a case by case basis and the secured lender – or the mortgage provider – may accommodate the servicing of other loans alongside the mortgage on a proportional basis to the remaining sums outstanding.

After the two-year period, the available cashflow will be used to service the repayments on an appropriate family home.

Kevin Johnson, CEO of the Credit Union Development Association said the move was welcomed by unsecured lenders.

"Credit unions are on the side of their members and always work with them in tough times as well as good," he said.

Struggling

"We continue to work within the Central Bank facilitated burden-sharing talks and see merit in trialling a pilot study, particularly one that seeks to help those heavily indebted but technically still solvent and therefore not qualified to become personally insolvent.

"We believe we have a duty of care to our members to make every effort to identify the best and most effective solution for managing and supporting those members who now find themselves struggling with debts."

clairemurphy@herald.ie


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