# Significant credit card debt potential early liquidation of pension fund to settle or part settle



## walktothewater (7 Apr 2022)

My situation is outlined as follows:

(1) Approx €160k in pensions at current values.
(2) Credit card debt of approx €25k on which €29.00 per month is being paid i.e. minimal payment. Interest frozen and debt transferred to collection agency.
(3) Previously had been on high income but currently reliant on social welfare since 2019 due to significant long term mental health issues. Physical health fortunately v good.
(4) Turn 50 in Sep 2023, therefore could liquidate pensions early at that point.
(5) No dependents
(6) No significant assets apart from funds in pension.
(7) No mortgage debt, no other debt other than credit cards apart from small overdraft.

My question is essentially if liquidate pension when I turn 50 am I obliged to use 25k of it to settle the credit card debt? Note, I am not looking for ethical guidance here, but more around the legal ramifications. Secondly, is it permissible to partially liquidate a pension at 50 or is it 'all or nothing'? Many thanks in advance.


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## Brendan Burgess (7 Apr 2022)

Hi 

If you have €80k cash, they would get a judgement against you and you would have to pay it.

Do you own your own home without a mortgage? 
If you do they could apply for a judgement mortgage which would make matters very difficult for you.

Have you spoken to MABS or some other debt advisor?   I would imagine that if you offered to cash in your pension early, they would give you a very big discount on your debt.  

But get MABS or a debt advisor to make that call to them.

Brendan


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## walktothewater (7 Apr 2022)

Hi Brendan,
Thanks for this. No, I don't own own home or any other property, I live with a relative, which by the sounds of things is probably advantageous to some extent as the option of seeking a judgement mortgage is not available to them. Just to clarify, what is significance of the €80k figure?
I spoke to MABs back in 2019 and had considered going down the route of seeking a Debt Relief Notice, my MABs advisor felt this wasn't best option for me given my relative youth as view was my mental health and accordingly career prospects/income would improve but so far that has not occurred.


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## peemac (7 Apr 2022)

This is hardly helping your mental health and if you had closure on it you may find you have a brighter future.
With no realisable assets of value and a debt that has little hope of being paid in the normal run of things, I would certainly look at some form of debt resolution / write off.

Your pension really should be to give you something to look forward to in retirement and I would not look at using it for this scenario


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## Brendan Burgess (11 Apr 2022)

walktothewater said:


> a Debt Relief Notice, my MABs advisor felt this wasn't best option for me given my relative youth as view was my mental health and accordingly career prospects/income would improve but so far that has not occurred.



This doesn't make any sense to me.   If you expect your income to improve, then you should try to get your historical debts written off while you have a low income. 

Let's say you get a job at €50k a year. Then you will be considered earning enough to pay off your debt. 

A DRN would be far better than allocating part of your pension to clear this debt.

Brendan


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## walktothewater (11 Apr 2022)

Brendan Burgess said:


> This doesn't make any sense to me.   If you expect your income to improve, then you should try to get your historical debts written off while you have a low income.
> 
> Let's say you get a job at €50k a year. Then you will be considered earning enough to pay off your debt.
> 
> ...


A DRN requires that:

If your net income (after tax, PRSI and Universal Social Charge) increases by €400 or more per month, you must give half of that increase to the ISI

within the three year period covered by the DRN. It is not the let-off it might appear. I would argue the conditions actually act as a significant disincentive for a person on low income to improve their position at least within that three year period. 






						Debt Relief Notices
					

People on very low incomes who cannot pay their debts may apply for a Debt Relief Notice.




					www.citizensinformation.ie


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## Brendan Burgess (11 Apr 2022)

walktothewater said:


> I spoke to MABs back in 2019



The three years is nearly up!


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## Brendan Burgess (12 Apr 2022)

Hi WTW 

I spoke to someone involved in the area. 

The advice given to you by MABS in 2019 may or may not have been correct. But in any event, it should have been kept under review. As the correct advice at the time may well have changed as your circumstances and expectations evolved.

On the face of it, the DRN seems ideal for you.   

You seem to think that it's not suitable because if your income improves over the next three years, you will have to pay more towards your debt.    But without the DRN, you have to pay the whole debt. 

Go back to MABS.  

There are ways to deal with this debt. Under no circumstances, should you touch your pension fund for it.

Brendan


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## Brendan Burgess (12 Apr 2022)

Hi WTW

I have written a Key Post on DRNs in general here






						Key Post - What can I do about debt I can’t afford to repay – I don’t own a house.
					

I have no direct experience of this, so corrections are welcome.   It is meant to be a simple introduction and is not designed to cover all exceptions etc.   The Debt Relief Notice is designed for you if…  You owe less than €35,000  You are unable or struggling to meet the repayments on this...



					www.askaboutmoney.com


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## walktothewater (13 Apr 2022)

Thanks a lot for this Brendan and the key post.


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## walktothewater (14 Apr 2022)

I scheduled a meeting with Bray MABS last week but had to cancel as I just wasn't up to it due to my mental health. I have to go into hospital again (sixth stay in the last four years!) for a spell but will make contact with MABS again. I will keep you guys updated, as it may be useful to others on here to learn of personal experiences of someone in this situation. Obviously, if I had not been in high income before I would not have been extended such high level of credit card debt. When my income dropped, I fell into the habit of using high interest credit card debt to fund household expenses, the result was not good. The old rule of avoiding the use of short term debt except in the short term is valid but in my state of delusional mental illness I had forgotten it.


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## Baby boomer (14 Apr 2022)

walktothewater said:


> I scheduled a meeting with Bray MABS last week but had to cancel as I just wasn't up to it due to my mental health. I have to go into hospital again (sixth stay in the last four years!) for a spell but will make contact with MABS again. I will keep you guys updated, as it may be useful to others on here to learn of personal experiences of someone in this situation. Obviously, if I had not been in high income before I would not have been extended such high level of credit card debt. When my income dropped, I fell into the habit of using high interest credit card debt to fund household expenses, the result was not good. The old rule of avoiding the use of short term debt except in the short term is valid but in my state of delusional mental illness I had forgotten it.


Best wishes for a good recovery - I hope it all goes well for you!  I wonder would it be possible to get a doctor's letter saying you are scheduled for inpatient treatment and send a copy to credit card providers and debt collection agencies.  This should get them off your back for a while and make sure there's no enforcement action against you.  
I'm no mental health expert, but I'd imagine engaging with MABS would actually set your mind at ease and might assist your recovery.  MABS have a very impressive reputation and I'm sure they've dealt with many people in situations like yours.


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## walktothewater (14 Apr 2022)

Baby boomer said:


> Best wishes for a good recovery - I hope it all goes well for you!  I wonder would it be possible to get a doctor's letter saying you are scheduled for inpatient treatment and send a copy to credit card providers and debt collection agencies.  This should get them off your back for a while and make sure there's no enforcement action against you.
> I'm no mental health expert, but I'd imagine engaging with MABS would actually set your mind at ease and might assist your recovery.  MABS have a very impressive reputation and I'm sure they've dealt with many people in situations like yours.


Thanks Babyboomer. I can certainly furnish letters from my psychiatrist to them if required but there is no active enforcement action at this point, there is no point from their side as I have no or very few assets. I provide updates of my financial situation, as required, and pay the €29 a month, which obviously makes a small dent in the context of €25k debt but at least it shows I am not ignoring the debt. I am living with my mum who is elderly, I have no rights of tenancy or ownership in the home (which means my mum could evict me at any point and I would have no legal recourse), but that cuts both ways as my creditors have no legal rights to enforce a judgement mortgage against the home either. As regards the potential future, if I were to inherit the family home at some point, then I would become a home owner but we'll cross that bridge when we come to it. My brother and sister are financially independent.

(Edited to correct a figure.)


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## Brendan Burgess (14 Apr 2022)

walktothewater said:


> As regards the potential future, if I were to inherit the family home at some point, then I would become a home owner but we'll cross that bridge when we come to it.



Hi wtw

Get the debt written off via a DSA before you inherit the house. 

If you own a house, they could get a judgement mortgage against it.

Brendan


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## walktothewater (14 Apr 2022)

Brendan Burgess said:


> Hi wtw
> 
> Get the debt written off via a DSA before you inherit the house.
> 
> ...


Yes that's what I thought. Thanks Brendan.


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## walktothewater (15 Apr 2022)

Crunching some numbers....

If I am correct in my calculations, if I seek and am granted a DRN, and if I were to obtain a job on, say, €17k a year, I would have to repay €400 per month. If I were to obtain a job on €45k gross a year I would have to repay €944 per month. In the latter scenario I could repay 50% of the outstanding amount in little over a year and exit the DRN.

Another issue. I am a member of a professional institute and and members who experience insolvency events are expected to notify this institute. My understanding, and I am not a lawyer, is that a simple disclosure of an insolvency event would not necessarily attract sanctions against the member, and that a DRN is an insolvency event. My understanding is that they take a less lenient approach if they discover that a member has had an insolvency event but not disclosed it, and that seems reasonable. I have been advised that a layman's insolvency (as in liabilities exceeding assets) does not require disclosure. If it did most of the membership would have had to make reports declaring their insolvency during the economic crisis of 2008-2011.

There is also a potential concern regarding potential future employers. Currently if asked the question "have you ever declared bankruptcy or entered a legal arrangement with creditors" I can answer no. However if I went the DRN route and if was asked the question at any stage in the recruitment process I would have to disclose it. I have to say in general in my experience, the question is not asked on online job applications, but I am getting nowhere with job applications and not even making it to interview. So I cannot say if employers currently seek disclosure of such events at some stage in the recruitment process. I have been so long out of the work place that I am not up to speed on current practices.
I am not entirely idle as I was recently co-opted to a board of directors of a charity, which helps keep me busy and is good for my CV also, but board directors are unpaid, so it does not impact on my financial situation one way or another.


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## Brendan Burgess (16 Apr 2022)

walktothewater said:


> If I am correct in my calculations, if I seek and am granted a DRN, and if I were to obtain a job on, say, €17k a year, I would have to repay €400 per month. If I were to obtain a job on €45k gross a year I would have to repay €944 per month. In the latter scenario I could completely repay the debt within little over two years and exit the DRN.



If you expect to return to earning a good salary, you should pay your debts. 

If you are uncertain, then you go for a DRN.

If you get a DRN, and your income subsequently improves, you can pay half the debt and exit the DRN process early.

So, apart from the professional institute issue, there is really no downside to the the DRN.  And there are huge upsides. When this debt is gone, you won't need to worry about the lender getting a judgement against you if you inherit a home.

Brendan


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## Brendan Burgess (16 Apr 2022)

A professional institute should have someone senior on its staff who can advise on such issues.

They have experience of members falling on hard times.  You should make an appointment to see that person and be completely open with them. They will tell you what the rules are.  And if it is a case that a DRN will cause you problems, then just live with the debt. 

Brendan


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## walktothewater (16 Apr 2022)

Brendan Burgess said:


> If you expect to return to earning a good salary, you should pay your debts.
> 
> If you are uncertain, then you go for a DRN.
> 
> ...


Apologies, yes I had forgotten that under the DRN rules 50% of repayment is sufficient to exit the process. So on a salary of say €45k I could potentially exit a DRN within about 14 months or so and have half the debt written off. Even in a job of a low salary of say €17k I would be released from the debt after a bit under three years having paid off 50% of it. (€4,800 X 3 is €14,600 , which is over 50% of the €25k debt.)


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## walktothewater (16 Apr 2022)

Brendan Burgess said:


> If you expect to return to earning a good salary, you should pay your debts.
> 
> If you are uncertain, then you go for a DRN.
> 
> ...




You and others state that I should not liquidate my pension to repay the debt. That strikes me as good advice.


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## walktothewater (25 Aug 2022)

Quick update.  My financial situation has not improved since previous update. I continue to apply for jobs and had one telephone interview a few weeks back, which did not lead to a second interview. I am minded to liquidate my pension in a year's time and make an offer as regards the debt. I engaged with MABS. I did not find the experience very pleasant. They sent me so many forms that I couldn't cope with completing them.


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## walktothewater (25 Aug 2022)

Should have clarified, the house is owned by my mum. Current value 750k approx, so between myself and two siblings, 250k each - well below the threshold. There would be no need for my creditors to seek a judgement mortgage as we could sell the house and out of my share I could make an offer to settle my debts.


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