Nothing in the Bill for the 10,000 people with unsustainable mortgages

[Brendan Burgess]

The Bill is a huge disappointment for anyone struggling with their mortgage who was hoping for some relief.

Let's illustrate by way of a case study.

Mr A has been in the MARP for two years but their home mortgage is unsustainable

Home loan|€300k
Property value|€200k
Unsecured creditors|€10k
net income| €30k

Mr B can go to a PIP (Personal Insolvency Practitioner) . The PIP can put a proposal to the lender and other creditors.

Either the lender or 50% of the unsecured creditors can veto it.

So what is the difference from what we have at present? Mr B can approach his lender to do a deal now. The bank can agree or disagree. They don't need a PIA administered by an expensive solicitor or accountant to do this.

Let's say that the creditors agree to a PIA which involves, the €100k negative equity being treated as an unsecured creditor. let's say that the unsecured creditors get paid 20% of what they are owed over the 6 years.

The PIA lasts up to 6 years, with a potential extension to 7 years.
No allowance is taken of the time co-operating with the MARP.

If the home is sold within the next 20 years, there is a clawback of any amount written off.

This is all just nonsense

Why would anyone opt for 7 years of hardship after 2 years of MARP? Just give back the keys and go to London or Belfast for a year. Start rebuilding your life after a year.

 

[Brendan Burgess]

Someone in this situation should forget the PIA.

What does the Debt Settlement Arrangement do for them?

They should get their lender's permission to sell their home in an orderly manner. If they don't, they should just hand back the keys.

Make a cursory effort to negotiate a Debt Settlement Arrangement to wipe out the unsecured debts.

If the banks don't agree, just opt for the 3 year bankruptcy in Ireland or the 1 year in the North or London.

 

[Brendan Burgess]

So what sort of case study do they show to illustrate how it will work?

Is it someone in a home worth €200k with a mortgage of €300k and a much reduced income? No, it is not.

Is it someone with a home in negative equity and a reluctant investor who kept their previous home which is also in negative equity? No, it is not.

Here is the [broken link removed] (See PDF Page 19)

Mr A | Self employed
Commercial property - value| €637,000
Commercial loan|€1,450,000
Owes Revenue|€50,000
unsecured business creditors|€100,000
Value of home| Not given
mortgage on home| €12,000

He also has given a personal guarantee on on the (unquantified) debts of a company that went into liquidation in 2007.

Proposal
His home is left out of the calculations.
The commercial property is sold and the lender gets the proceeds
The Revenue gets paid in full
The unsecured creditors write off most of their debt.

What an incredibly stupid and unrepresentative example!

How come these creditors have not already got judgement mortgages registered on the family home?

Why would they agree to a PIA and leave him in his family home?

The home should be sold and paid to his creditors.

 

[Kine]

Brendan,

I'm a little depressed reading your analysis above! Although I never expected to be able to just walk away from my house, I had harboured some small hope there might be something in the PIB that would have have been aplicable.

As it stands, I don't even need to move to London to build up domicile as I have been here for the past few years already! Exactly as you have said above, I have been approaching the Bank for the last 12 months attempting to get something agreed, but like most things Irish, the head is firmly planted in the sand and the can they just want to kick the can down the road!

Ah well.

Back to the drawing board!

 

[Steve Thatcher]

Hi Brendan I share your analysis of this.

The PIB is little changed from what we saw in January.

The Bill still has a away to go even to get thru Parliament. It then needs to have all its structures created and the staff who have no idea how any of this works, trained.
They need to decide who can be a Personal Insolvency Practitioner. That will not be an easy job for anyone as the legislation is a mine field of toing and froing from practitioner to client to insolvency service to court and back again.
It must have been put together by a committee.

Finally the banks have the final say. Turkeys and christmas spring to mind.

The DSA might work, but it is a 60-72 month commitment.

The PIA won't work 72-84 months and

Bankruptcy is a non starter, 3 years plus a 5 year IPO.

I can see a huge migration of the indebted moving North or to the UK

Steve