# My options under insolvency bill



## what to do (2 Feb 2012)

Hi guys,

I have some questions I hope you can answer regarding the proposed new bill and how it may help me.

I am currently working abroad but will be returning home this Summer. My current salary allows me to cover my personal debt but not by much. When I return home it will just about cover my outgoings (hopefully). My decision to return home is due to my contract expiring so I don't really have an option.

Anyway my current out goings are:
Mortgage (joint owned with brother) 700 p/month - 50k negative equity
Bank loan (unsecured) - 55k - 1,100 p/month
Credit union loan (unsecured) - 35k - 600 p/month (mother is guarantor)
Credit card (unsecured) - 10k - 250 p/month (minimum repayment)

So total unsecured 100k and outgoings of approx 2,650 a month.

I've really struggled with the repayments as I have only bare minimum to cover living expenses. My spouse has a property of her own and separate loan (all debts above are in my name only). 

When i return home my salary will be approx 2600 - 2900 a month so it will be tough to meet my repayments.

Basically my questions are:

1. What are my options in terms of the new bill?
2. Would it be possible to exclude the credit union loan from any potential insolvency agreement as i am not sure what impact it would have in terms of my mother being guarantor
3. Can i just deal with restructuring the unsecured debts and leave the mortgage as is?
4. Would I qualify for an agreement?

Apologies for the long email but I am just struggling to cope with not seeing any light at the end of the debt tunnel and its impacting life at home so ANY solution would be a great relief.


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## RichInSpirit (2 Feb 2012)

My thoughts are that you shouldn't dream of going down the insolvency route just yet.
The repayments on all that unsecured debt you have can be lengthened out making the repayments per month much smaller.
Since it's unsecured you can do this by just reducing the payments down to levels comfortable to yourself. Your lenders mightn't exactly agree with that but there's not a lot they can do if you stay paying something.


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## what to do (2 Feb 2012)

Thanks for the reply RichInSpirit.

When you say there isn't a lot they can do, surely they can start legal proceedings/debt collection if the debts fall into serious arrears?

The credit union loan has 6 years to run and the bank loan 5 years so extending them out even longer (and paying even more interest). 

Are banks taking steps to write off unsecured debt where the borrower has insufficient capacity to pay or are they offering any solutions?

Sorry if this seems a stupid question but i've been out of the country now for over a year so I am a little out of touch!


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## Bronte (3 Feb 2012)

You do not have 100K of unsecured debt.  Your mother is guarantor for 35K.

Who lives in the property you own with you brother?  If you default he will be liable.  

This new insolvency rules are not at all clear, are not passed, have not even been debated properly, look very cumbersome and bureaucratic to me and seem to have been written by civil servants with the banks and the only gain I can see is that lots of people are going to get jobs administering it.  Plus banks can veto a person being granted insolvency.  That might sound a like a way out for you but you'll have to wait a good long while yet.


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## 44brendan (3 Feb 2012)

More or less +1.
You will certainly need to properly address the CU loan or your mother will be called upon to do so. Insolvency will not absolve her of liability. restructure of this debt is therefore required.
Your brother is jointly liable on the property loan (full liability for the whole debt). Bronte's question is important, as if this is your brothers PDH, he is entitled to some protection under MARP. If it is a rented property, you both need to decide what approcah to take. 
The Bank loan and CC balance are also going to need addressing. I.e. what will you be in a position to afford to repay?
UK bankruptcy may be an option, but it's not an easy one. The new insolvency legislation willnot protect you from legal proceeding for current debt. I agree with Bronte's comment that it is a long way from being implemented & the Bank's will not sit back in the interim if you fail to deal with them.

In summary, there is no easy solution or quick fix to these problems.


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## what to do (3 Feb 2012)

Thanks for the comments guys.

The house is jointly owned with my brother currently living in it as his PPR.

I don't think i explained myself properly above but my intention would be to

Leave the mortgage as is and continue to repay in full.
Leave credit union as is and continue to repay in full.
Restructure the bank loan and credit card, perhaps with a debt write off of 50% which would free up about 600/700 a month to allow me to service they remaining debts going forward.

Is a scenario like this possible under the proposed legislation?


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## frostie (4 Feb 2012)

UK Bankruptcy, or bankruptcy here, will not be an option, as with the mortgage and credit union guarantee, your brother and mother with you, are jointly liable for the debts. Your debt would be discharged, but they would have to cough up.

With any of the new mechanisms, you cannot keep the CU separate either, as this would show preference to an unsecured creditor. Basically none of the new mechanisms would be suitable as you state that you will be more or less clear of a number of debts in 5 or 6 years, so you are not a candidate for a PIA, or debt relief cert as debts exceed €20000.

Banks are writing off unsecured debt, outside of these new arrangements, but not in a situation where they are gettting a monthly repayment. There is no incentive for them to do so, but there is if you had a lump sum to offer as settlement.

What you need is a debt management plan DMP, which can reduce your current monthly repayments to a more affordable amount, as you can afford to pay most of your debt. You could, although I wouldn't advise it, treat the CU separately. You don't need to though, as the CU would accept the reduced payment terms of a DMP, where the payments are weighted according to who is owed most gets most per month proportionately. You would default on the amount that your creditors want repaid each month, offering a lower amount, but with their consent, you could get interest frozen so your debt doesn't rack up with reduced payments. It would affect your credit rating too, although any other measure in the new bill would destroy your credit-worthiness.

A DMP would also normally prevent any legal action taking place, as your SFS would show what you can reasonably afford to pay, so the creditor will understand, and wont need to go to the expense of court action. If you defaulted on the arrangement however, they could then go to court.

www.frost.ie


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