"Why personal insolvency will soon be the only game in town"

I don't agree with him at all.
There will be many games in town.

I don't know which will turn out to be the most popular, but I guess it will be in the following order


  • Agreements between borrower and mortgage lender without a DSA
  • Agreements between borrower and mortgage lender with a DSA for the unsecured creditors
  • Voluntary sale or repossession followed by a settlement of the shortfall.
  • Bankruptcy
  • Personal Insolvency Arrangement
These are very difficult to predict. It depends on policies of the lenders and how borrowers react. But this is how I expect it to develop:

Voluntary agreements outside formal insolvency
If AIB is prepared to write down debt and give a generous split mortgage, this will usually be the best outcome for both AIB and the borrower.
The borrower is allowed a higher level of expenditure than the ISI Reasonable Living Guidelines. There is no leakage in PIP fees.

If the unsecured creditors are small,they will be paid in full.

If the unsecured creditors are large, they can be dealt with via a Debt Settlement Arrangement.

I understand that a Debt Settlement Arrangement is planned in some of the AIB debt write off cases already agreed.

The Central Bank is trying to develop a protocol for secured and unsecured debtors to work together. That would be the best outcome for everyone, other than the PIPs who would lose out on fees.
Personal Insolvency Arrangements will be rare

Mortgage lenders have indicated that where the main debt is the mortgage, they won't be agreeing to Personal Insolvency Arrangements.

If ptsb offers a borrower a split mortgage, and the borrower rejects the split, then ptsb is unlikely to approve a PIA.

As they will have the right of veto, that's that.

Repossession and writeoff of the shortfall will be another option

Even if AIB or ptsb offers the customer what appears to be a generous deal, if it's not sustainable, the borrower may be better off agreeing to a voluntary sale and doing a deal on the shortfall.

But in most cases I have looked at, the housing costs in the split mortgage are far lower than they would be if the borrower were to try to rent a house in the open market after a voluntary sale.

Bankruptcy will be primarily a threat in the background

Where people have multiple personal and business debts, then bankruptcy will be an option.

Where the mortgage on the family home is the main debt, then voluntary sale will be much better than bankruptcy. If the lender won't do a deal on the shortfall, then the borrower will go bankrupt.
 
Are you allowed to do both options at the same time, take your AIB example, can you come to an arrangement with them separately and also do a DSA?
 
Absolutely.

Some borrowers will try to do a DSA on their unsecured debts while not even talking to their mortgage lender. Of course, the unsecured creditors might well veto the DSA if they feel that the borrower should pay less in mortgage repayments and more to them.
 
I suppose the title doesn't do the idea justice - the point is that some insolvency solution will be required for guaranteed finality which is why even IMHO who have done nothing but belittle the service are signing up to it.

The recent informal deals sort out the mortgage (which as mentioned serves the secured lenders requirements without voting getting in the way) then the remainder goes for a s69 DSA.

We do informal deals - so I know in practice it isn't the only game, but equally the second round of CB requirements have not come down the line, it's no surprise there are only 10 debt mgt firms - the costs and application are onerous as will be the ongoing requirements, this alone will ensure that apart from unregulated firms that costs go up for provision of the service.

Ideally there would be a level playing field, everybody either regulated or not (prefer 'lighter' rather than 'none' perhaps). This isn't the case and that's why it will take time. There are also other issues such as how informal deals may or may not work if loan books are sold etc.

In the main I think that PIP's will be more in demand although what branch of solution they use may change
 
Hi Karl

I am not sure what the main point of the article is, so perhaps I guessed at it from the headline.

I think that the main game in town will be agreements between the borrower and the mortgage lender.

I hope that the Central Bank succeeds in getting the secured and unsecured lenders to agree a protocol for dealing with them.

In some cases, it won't be possible to get such agreement, and so voluntary surrenders, PIAs, DSAs and bankruptcy will also be used.

But I imagine that bilateral agreements will far outnumber all the others put together.

Many borrowers will be able to reach such agreements without using a Debt Advisor. Some will get help from the voluntary organisations such as New Beginnings and IMHO.

I am less worried that they would be taking advice from unregulated debt advisors such as IMHO. I am more worried that they would be bounced into PIAs by unscrupulous PIPs when a voluntary agreement would be much better.
 
I read this article a few times by Karl Deeter and just couldn't get to grips with it. Then I twigged.........its April Fools day.......Nice one Karl, you got me.
 
Brendan Burgess said:
But I imagine that bilateral agreements will far outnumber all the others put together.

Many borrowers will be able to reach such agreements without using a Debt Advisor. Some will get help from the voluntary organisations such as New Beginnings and IMHO.

I am less worried that they would be taking advice from unregulated debt advisors such as IMHO. I am more worried that they would be bounced into PIAs by unscrupulous PIPs when a voluntary agreement would be much better.
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The bilateral agreement approach (mentioned in the article) is likely because the bank will fare better that way and don't get voting problems because both secured and unsecured have to pass a PIA.

The other issue that formal arrangements have is that they deal permanently with previous judgements etc. The point being made wasn't that it would be 'exclusive', rather that one of the solutions will feature in more permanent solutions.

As it stands all of the informal deals made to date could likely be DSA candidates as most of the advisors fall prey to dealing only with the mortgage debt alone.
 
most of the advisors fall prey to dealing only with the mortgage debt alone.
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This might be the problem.

If someone is authorised by the Insolvency Service as a PIP, but not by the Central Bank as a Debt Advisor, they won't be able to propose informal agreements.

Brendan
 
Brendan Burgess said:
It's interesting that Ross Maguire is very clear that Bankruptcy is the only game in town.

Brendan
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If one is in Huge Negative Equity how does bankruptcy impact on the family home ? If there is nothing to be gained by selling it would the family be left in it ? or does it by law have to be sold if you go bankrupt ?
 
I was at an event that Ross Maguire and new beginnings were speaking on bankruptcy. They do SELL it as an easy option for people.
 
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