# AIB and KBC to write off all debts in cases of voluntary surrender



## Brendan Burgess (4 Jun 2014)

OK, the Irish Times has a full story on it here 

*Debt free in three months with new bankruptcy option*





> [broken link removed] and KBC Bank have agreed a deal with the [broken link removed]  (IMHO) which will allow people to be debt free within three months,  therefore providing for one of the shortest effective bankruptcy terms  in the world.
> Under the new structure, clients of  the IMHO who have an unsustainable mortgage, and who choose to  voluntarily surrender their property, will be processed through an  accelerated Personal Insolvency Arrangement (PIA) which will include any  unsecured debt that might exist. This would include credit card debt.



I have argued this from the start 

*A Personal Insolvency Arrangement does not have to be for 6 years!*

Jim Stafford refers to "lump sum PIAs" in that thread, claiming that these constitute the majority of PIAs.


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## Steve Thatcher (4 Jun 2014)

At last common sense, a version of our IVA lump sum payment. if you have a load of unsecured debt and someone with a few quid to offer in full and final settlement, then that is the way to go.

I will certainly recommend those coming to me with the ability to do this talk to a respected PIP about the option.

I guess the problem is as always, "how much money, or what percentage of the liability will get the deal done". No detail on this.

Steve Thatcher
[broken link removed]


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## euroman (4 Jun 2014)

Do you need a lump sum payment to avail of the fast-track insolvency deals? Thank you.


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## Matthew Moore (4 Jun 2014)

Steve Thatcher said:


> At last common sense, a version of our IVA lump sum payment. if you have a load of unsecured debt and someone with a few quid to offer in full and final settlement, then that is the way to go.
> 
> I will certainly recommend those coming to me with the ability to do this talk to a respected PIP about the option.
> 
> ...



Can't see any mention of a lump sum being required. In the earlier article that Brendan linked to there was a mention of a small €100 lump sum by a PIP who got 3 of them across the line.


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## Matthew Moore (4 Jun 2014)

This is a great development. 
Hopefully other lenders will follow the lead but I can see BOI being reluctant considering Mr Bouchers recent comments about vetos.

There is a distinct need to purge the system of bad debt that will probably never be repaid. The sooner this can be done for genuine cases the better.

It still remains to be seen if the OA will allow any early discharges from bankruptcy once its clear there's no money or assets left. I have heard talk of a Personal Insolvency Roadshow so maybe by the time thats get going they will have some more favourable options to entice people in.


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## Steve Thatcher (4 Jun 2014)

pat2 said:


> Can't see any mention of a lump sum being required. In the earlier article that Brendan linked to there was a mention of a small €100 lump sum by a PIP who got 3 of them across the line.




It also mentions lumps sums and contributions from family.

This will obviously play out and it will be interesting to see how it develops. But finally we may be getting to a place where underwater property can be handed back and if there is no chance of a contribution, a write off ensues.

I have to say tho that I am still getting loads of people saying they are being told no write off under any circumstances. So these two situations appear at odds.

Steve Thatcher


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## Matthew Moore (4 Jun 2014)

Steve Thatcher said:


> I have to say tho that I am still getting loads of people saying they are being told no write off under any circumstances.



That seems to be the default response from the banks but it was highly unlikely there was ever going to be widespread write downs while people hold onto properties and refuse to enter some insolvency mechanism.
Even BOI will have to write off mortgage debt when people go through bankruptcy so what they are saying is not true.


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## Brendan Burgess (4 Jun 2014)

Sorry for the confusion. 

I saw the story first on the Indo and linked to that. 

But the Irish Times had more detail about the actual scheme developed by the IMHO.

I have lobbied the banks for some time to produce a protocol for voluntary surrender, but fair play to David Hall for managing to persuade the two banks to agree to it. 



Brendan


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## DebtCert (4 Jun 2014)

KBC Bank denies three-month insolvency deals on mortgages:

http://www.irishtimes.com/business/...month-insolvency-deals-on-mortgages-1.1820770


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## bugler (5 Jun 2014)

...probably afraid of a wave of borrowers throwing the keys at them. 

There is a substantial body of people who can't service their mortgage and the loss needs to be crystallised, whether the banks want to cover their eyes and ears or not. I would think they should be welcoming the prospect of reclaiming some properties and selling them (it is currently a very good time to sell property in Dublin), without having to resort to the marathon repossession process. 

If borrowers have woken up to the fact that they will lose their properties then banks need to wake up to the fact the debts are not going to be paid.


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## RichInSpirit (5 Jun 2014)

I read the article too yesterday on the Irish Independent.
Very surprised at the speed of the process.


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## demoivre (5 Jun 2014)

No mention of voluntary sale of the home in Charlie Weston's article yesterday. In fact he says the accelerated PIA secures the family home. This was my initial understanding of an accelerated PIA when I first saw it mentioned ie part of mortgage written off, part of it parked and remainder paid as normal and all unsecured debt written off.
http://www.independent.ie/opinion/c...-borrowers-30327421.html#sthash.RlSUj3kS.dpuf


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## bugler (5 Jun 2014)

demoivre said:


> No mention of voluntary sale of the home in Charlie Weston's article yesterday. In fact he says the accelerated PIA secures the family home. This was my initial understanding of an accelerated PIA when I first saw it mentioned ie part of mortgage written off, part of it parked and remainder paid as normal and all unsecured debt written off.
> http://www.independent.ie/opinion/c...-borrowers-30327421.html#sthash.RlSUj3kS.dpuf



Surely that would depend on whether the borrower can come close to making the repayments? Charlie's article is a bit bare bones. The examiner article has a bit more detail and explains that it could result in various outcomes for various people. Obviously some combinations are no doubt possible. 

http://www.irishexaminer.com/ireland/borrowers-to-write-off-loans-after-3-months-271001.html

1. Surrender of their own home
2. Surrender of their BTL property
3. An agreement that sees the borrower retain their home (lump sum)

The fact is, there is a substantial rump of borrowers who cannot afford the repayments on their mortgage(s) under any reasonably foreseeable circumstance and the ownership of these properties (both BTL and PDH) will have to change hands at some point. Even if you believe this is a small % of the overall arrears figure it is still a substantial number because our overall arrears are so preposterously high. We've been denying that reality for 6-7 years now and at some point it has to be faced.


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## Brendan Burgess (5 Jun 2014)

It doesn't seem to me that anything formal has been agreed.  No borrower will be able to march into AIB and claim that they qualify for some deal.  

The following would make sense for the lenders 

*A completely unsustainable home loan in big negative equity 
*In exchange for an agreed sale, the lender to use their unsecured debt to force through a PIA or DSA on the credit unions and other unsecured debts. 

*A sustainable mortgage if restructured 
*For example a €400k mortgage on a €200k house with €50k other unsecured debts.  Borrower could afford a €300k mortgage.

Treat €100k as unsecured and force an accelerate DSA on the other unsecured debts. 

Bank likely to recover €300k rather than  less than €200k in a bankruptcy or court repossession. 

*A sustainable home loan if buy to let and unsecured creditors sorted 
*Agreed sale of buy to let and force a write off on unsecured creditors in an accelerated DSA.


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## Dr.Debt (5 Jun 2014)

Its clear to me that the IMHO is using the media to suck in the punters with sensationalist headlines. 

I wasn't at all surprised that KBC came out yesterday to deny outright IMHOs claims that some sort of deal had been reached on short PIAs

I think anyone dealing with the banks on a daily basis will know that the banks are not encouraging PIAs. Probably especially true in the case of KBC

The only reason the IMHO is releasing this type of headline to the press is to get the punters through the door.


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## suarez (5 Jun 2014)

Yesterday's reporting of the AIB / KBC / IMHO deal and KBC's subsequent denial  is emblematic of everything that is wrong with Ireland's response to the mortgage arrears and insolvency crisis - a bleak farce comprising of a series of false dawns. I'm very disappointed in David Hall for yesterday's mess.


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## Brendan Burgess (5 Jun 2014)

Dr.Debt said:


> Its clear to me that the IMHO is using the media to suck in the punters with sensationalist headlines.
> 
> ...
> 
> The only reason the IMHO is releasing this type of headline to the press is to get the punters through the door.



I don't agree. 

David Hall has negotiated a good information/advisory service for borrowers paid for by AIB and KBC. This has helped to get some people who would not otherwise have engaged, to engage which is for their benefit and the benefit of the lender. 

I think he may have overstepped the mark in his enthusiasm on this issue. He may have exaggerated the agreement, but he has not made it up either.


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## Gerry Canning (5 Jun 2014)

Inclined to go with Dr .Debt.

A few things seem obvious, if you accept the following.

1. Banks after 5 years have a good idea of the completely unsustainable mortgages.


Therefore they have poor and very poor choices.
a. Go down the emotive eviction route , that would be fraught with difficulty and costs.
b. Go down a pragmatic consented sale type route , at least they get a clean cost effective closure.
..................................
If customer goes down b.route , customer can at least have an opportunity of getting on with their lives. The customer gets closure on this horror.
...................................................................................
This (initiative) has the smell of IMHO being used to test the market for Banks for this type of solution.

On the face of the little we see , it has merit.


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## Dr.Debt (5 Jun 2014)

Brendan, I would guess that IMHO went to the two banks in question with this proposal and there may have been a couple of nodding or sympathetic ears on the bank side of the table but no more than that. KBC has denied that there is such an agreement in place and that's the current situation. Otherwise I would have to say that I admire the IMHO organisation for what they are trying to do, however building up the hopes of distressed and vulnerable debtors with false hopes is not the way to go.

The plain truth is that all the main banks are simply not willing to write off debt en-masse. At this stage there must be thousands of cases that have approached banks willing to sell properties in exchange for writing off the negative equity shortfall. Sometimes the banks will say "that we wont pursue the debtor for the shortfall if he doesnt have the money" but they are not willing to formalize the write-off in a PIA OR put anything in writing. And that's the stale mate.

And if you take it a step further, the reason the banks are not agreeing to the type of solution that the IMHO is trying to achieve (as per its latest press release) is that the banks simply don't have the resources (balance sheet strength) to absorb the level of debt write off that is needed to solve the mess in overall terms.

Quite frankly, neither the central bank or the government is stepping up to the mark here. The main task facing us as a country is how to recapitalize the banks in such a way that we can then move forward and purge the unsustainable debt. The central bank continues to turn the screws on the banks in terms of resolving the arrears books but the banks are really only playing lip service to this.

The facts remain.As a country We have a huge debt problem. The banks need to be forced to purge the unsustainable debt as quickly as possible. To do this they will need either further capitalization or they will need a bail-in (Cyprus style) where the depositors monies are converted to capital. This has to happen sooner or later. We are just prolonging the agony now and David Halls dream cannot happen until the bigger picture is sorted out first.


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## Delboy (5 Jun 2014)

ah shucks, David Hall's dream can't happen until the bigger picture is sorted!
So either a bail in by the taxpayer or robbing depositors of their hard earned cash....where do I sign up to either options in order to fulfill that dream!


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## Brendan Burgess (5 Jun 2014)

Dr.Debt said:


> And if you take it a step further, the reason the banks are not agreeing to the type of solution...is that the banks simply don't have the resources (balance sheet strength) to absorb the level of debt write off that is needed to solve the mess in overall terms.
> 
> .


.

I doubt if that is the reason. If a mortgage is in heavy negative equity and heavy arrears, the bank will have already provided for it.  Formally writing it off will not make any difference to the provisions they have to make. 

I am against banks writing off money which they can collect. I fully support them writing off money which they are never going to collect.


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## Dr.Debt (5 Jun 2014)

Yes and that's the critical point. You believe that the provisioning at the banks has been done accurately and I absolutely do not believe it. I'll nail my colours to the mast here by saying that the day of reckoning has yet to come and the banks will need to be saved or bailed sooner or later.

To finish up here's one example, I will share with you. I know of one high earner who's property portfolio is seriously under water.(millions) The loans are not in arrears. The bank believes that the debtor will be able to pay back by chugging along on basic living costs for the next twenty five years.
The reality is that the debtor is getting his house in order and will file for bankruptcy after christmas. There's five million alone that doesn't appear on any banks provisions anywhere but will hit the banks bottom line within twelve months. This is not an isolated example.


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## Kine (5 Jun 2014)

Steve Thatcher said:


> I have to say tho that I am still getting loads of people saying they are being told no write off under any circumstances. So these two situations appear at odds.


 
It seems to be dependent on the borrower but my experience with UB is that once you are buy-to-let your options are twofold:

1) Amend and Pretend
2) Go bankrupt


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## suarez (5 Jun 2014)

Dr.Debt said:


> Yes and that's the critical point. You believe that the provisioning at the banks has been done accurately and I absolutely do not believe it. I'll nail my colours to the mast here by saying that the day of reckoning has yet to come and the banks will need to be saved or bailed sooner or later.
> 
> To finish up here's one example, I will share with you. I know of one high earner who's property portfolio is seriously under water.(millions) The loans are not in arrears. The bank believes that the debtor will be able to pay back by chugging along on basic living costs for the next twenty five years.
> The reality is that the debtor is getting his house in order and will file for bankruptcy after christmas. There's five million alone that doesn't appear on any banks provisions anywhere but will hit the banks bottom line within twelve months. This is not an isolated example.



I agree.


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## Gerry Canning (5 Jun 2014)

With Dr Debt again.

Why would any sane person live in penury for the next 2 decades? 
It is not like they killed someone?


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## 110quests (5 Jun 2014)

Gerry Canning said:


> With Dr Debt again.
> 
> Why would any sane person live in penury for the next 2 decades?
> It is not like they killed someone?



Indeed. "Chugging along" as described by Dr.Debt is so apt. There are three households I know who are exactly as described, just managing to live, having cut back on everything in order to not fall into arrears. House maintenance, car change, new clothes, children's extra curricular activities, private health insurance, socialising, etc are dreams of the past. Will their bubbles burst when children hit the expensive years ahead? For how many years will they endure this existence before someone can hold their calm no longer.

Negative equity holds for all three households plus no sight of income increase of any appreciable difference, leaves them with no chance of trading up, down or sideways so there are two decades looming in a life of stagnation. Each family has a PPR only.  

Are they contributing to the local economy?  Mainly to local Lidl/Supervalu. Chemist when children sick(no med.cards) Toys from local huckster shop. Not a red cent to local hotels, restaurants, pubs, cafes, hardware or garden center. That's how life pans out when people are riddled with taxes and charges, income cuts, and mortgages acquired when they were proportionate to income and house value and now being sustained valiantly at great personal expense. None of them killed anyone, as you say, but there is a greater chance of someone or something killing them too soon. 

If either of the three could get a write down of some of their negative equity to then pay a lower level sustainable mortgage how better the looming two decades would be.


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## nec (5 Jun 2014)

The first impression after yesterday news was:

Banks need a fresh capital no matter what and they want to use the summer months to let people go out from properties and speak with them. The wording of the articles is very vague, using eye catching words such as: ''legislative framework''  - this means nothing. Can one person here show me an actual copy of an agreement made by one single bank in Ireland showing in writing the terms of the actual Write off.
- none exist.

and I would gladly tell why. because they aren't agreed, just a media show to show that banks aren't that bad.

It's like a post soviet era Lotto lottery in Czechoslovakia - few articles, few tv and radio shows... everyone is speaking of the winner. But there is none.


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