# Personal debt problem



## balderick (5 Sep 2011)

Hi there,

My wife and I have both been unemployed since last November and we have just been struggling along with social welfare payments as income. Basically we were in no position to pay back our personal loans with AIB - we took interest only payments for a few months in the hope that things might pick up on the jobs front but my wife had an accident that set us back again, so I went to Mabs who told us to stop making any repayments and they did a budget with us which we sent to the bank showing that we couldn't affort to make any repayments at all (which would have been around €250 each per month for the loans). The bank wouldn't agree to a break in payments again or anything like that so basically our accounts are in the red and i've been told that my accounts are going to be shut in a few weeks unless i clear outstanding balances, and then i think it becomes a bad debt. I assume the same will happen for my wife shortly after that. We only owe around €11,000 each which in the good times was not that much to repay but now is not possible. I'm just wondering has anyone been in a situation like this before - what happens after it's written off as a bad debt? Do I have to agree to pay a small amount each week? How badly will my credit rating be affected? We both still have credit cards with outstanding balances on them of around €700 and €1700, both paying 5% of the outstanding balance per month, which at this rate we are never going to clear. I wonder should we stop paying them back as well and let the visa accounts be closed and written off too? My wife also has a small credit union loan of around €1,900 with arrears of around €200 which we will clear when things improve or when my wife's accident claim is settled (the third party has admitted liability so that should just be a matter of time). Will the credit union look at credit ratings for future loans?

Thanks for any help with this.


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## hastalavista (5 Sep 2011)

Becoming a bad debt is a very different issue than ' being written off as a a bad debt".
Becoming a bad debt means they bank may give it to a debt collector or pursue you in the courts.
being written off as a a bad debt means the bank has decided, from an accounting perspective that the money is no longer recoverable. 
This does not mean you are debt free.
they can still chase you.

Forget about the credit rating, that is shot now anyway.

Once you miss a payment the ICB system picks it up and it stays for 5 years I think.

There are other posts here on that
put   [ ICB site:www.askaboutmoney.com ] into google search

Focus on what can be done with the current debt.
If i read your post correctly it runs as follows
 11,000 by 2 = 22,000
CC                   2,400
CU                   1.900

 paying 5% a month on the CC, with interest at 20% plus is a nonsense.

Are you renting where you live?


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## balderick (5 Sep 2011)

Thanks for replying Hastalavista. The total debt including credit card is around €22,000 - loans are around €19,000 with negative balances in the current accounts of around €700 because of unpaid loan repayments -  and we are renting in Dublin (just moved here a month ago), with no assets. From what I could understand when talking to the bank I was told that it may be written off as a bad debt and we might have to repay a small amount every week or so. The bank manager i spoke with was quite sympathetic when i explained my wife had had an accident and i told him that we had spent nearly €2,000 on medical expenses which we expect to recover plus more when the claim is settled, but as we had already had a three months break from payments he wasn't able to offer any other solution. We can't actually afford the 5% interest on the credit card either so we're probably just going to stop paying that too - the mabs budget would support the fact that we can't actually repay any debt at the moment. I'm just waiting to find out what happens next after they shut our accounts.


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## 44brendan (5 Sep 2011)

I agree with the earlier response that you should not worry about your credit rating. That is now affected and there is nothing you can do about it. You have been through the MABs process and based on your own summation of your financial condition you are not in a position to make any loan repayments. What you need to do now is to write to each of the financial institutions advising them of your predictiment and enclose a copy of the MABs findings. They are not obliged to accept these and may issue some threatening correspondence. They may even commence legal proceedings against you but if you have been fully open in respect of your financil condition there is nothing further you can do. Accept that you have a poor credit rating which is not in itself the end of the world and focus on moving on from here.


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## balderick (5 Sep 2011)

Thanks Brendan. It's just the Aib we are both dealing with and we have written to them and advised them of our circumstances with the Mabs budget attached. They have sent some letters out advising that our accounts are in arrears etc and if we don't rectify the situation soon they will shut our accounts. Our local branch manager did tell us this would happen and to just ride it out.


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## 44brendan (5 Sep 2011)

Dead on. There are people who can't pay and those who won't pay. As you clearly fall into the former group the Bank are unlikely to progress matters to Legal. Credit card company are likely to be more active in chasing you for payment but again write separately to them and advise them of your position. Best of luck!!


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## balderick (5 Sep 2011)

Thanks again for the advice Brendan. One thing though; we have our credit cards with AIB too. Would we need to write to them seperately if we were unable to repay the credit card debt or would the letter I have already sent to aib suffice?


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## Bronte (5 Sep 2011)

I think you should write one letter but clearly state it relates to all the different loans/overdrafts/credit cards.  Did you ask Mabs for advice on this.  

As others have stated you should not worry about your credit rating.  Instead as you are clearly not in a position to repay focus on getting AIB off your back. This will take time and patience on your side and with Mabs help you will get there soon enough.  Banks are writing off credit card debt and other debt but they have to go through the motions to recover it and they have to be certain you have no money.  

You also need to have a discussion with the credit union.  By all accounts they are very approachable.  Take along a friend if you need to.


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## Mpsox (5 Sep 2011)

MABS can provide sample/template letters which you can use to write to your creditors



Have you checked to see if you are entitled to any tax rebate for the unused portion of your tax free allowance for 2010
http://www.revenue.ie/en/tax/it/leaflets/it11.html#section6


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## frostie (5 Sep 2011)

balderick said:


> Thanks again for the advice Brendan. One thing though; we have our credit cards with AIB too. Would we need to write to them seperately if we were unable to repay the credit card debt or would the letter I have already sent to aib suffice?



If you are only going through the branch, one letter probably will do, but my advice would be to write to each department individually, as each department have different protocols they follow regarding debt collection, and in your case, they may be at different stages in this process. 

You should also quote your account number on each letter, relevant to that letter. One thing you should check out, MABS do check but it's not a give-in that MABS will _always_ do, is to check with your local social welfare department and community welfare officer to see if there are other entitlements you can claim to boost your disposable income eg rent supplement, FIS etc.

By doing this, you might be able to get enough to make even a token payment. Also, when you write your letters, ask them to freeze any interest or charges on the accounts. Generally, if you can make even a small repayment, they will do this, which will stop your debts increasing further.


www.frost.ie


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## balderick (6 Sep 2011)

Thanks for all the replies everyone.


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