Personal Insolvency Survey Results


The results of the Personal Insolvency Survey provide a good insight into people’s perceptions of the new insolvency process.  Information and trust are basic requirements for any system to work and it seems that both the banks and government are failing in this regard regarding the new personal Insolvency processes becoming available to people shortly.

Information Gap

enough_informationThe survey has given a clear indication that there is a significant information gap about the insolvency process.  79% of people surveyed said there was not enough clear information on the insolvency process. This reflects the fact that though there has been patchy media coverage and specifically very little comprehensive explanation of not only the process of insolvency but the specific outcomes for people. Banks have insisted that each case is different and needs to be dealt with individually. This is in fact incorrect. Most insolvency cases are the same involving home and buy to let mortgage difficulties which need significant write down. There may or may not be additional unsecured loans which have to be dealt with as well. That type of case will account for over 95% of cases.

Also another information gap has been the total lack of any updated information from the Insolvency Service of Ireland. Since its launch in April their web site has not had one single update! This is not very comforting for the thousands of people waiting on the opening of the service.

Family Home Protection

The corner stone of the Personal Insolvency Arrangement is the protection of the family home and over 54% of the people surveyed were not aware of the protection for the family home. This is a major information gap which needs to be filled without delay. This is information the lenders will not wish to publicise but which needs to be given in order for people to understand properly their options.

Trust

trustTrust is an issue for both government and banks on the implementation of the insolvency process. 88% of people indicated they did not trust the banks to engage with the process. A shocking reflection on people’s current experiences with the banks who say they are engages and it is people who are not! The banks have a long task ahead of them if they are to convince people to enter into voluntary arrangements with them as they are currently advertising.

Public register

There has been a significant out cry about the public register with good reason but the results in our survey surprised me.  My experience has been that most people are not too worried about the register as they consider it part of the pain they are taking for their part in not being able to pay their way. However, over 71% of people have indicated that they would be deterred from the insolvency process because of the existence of a public register.

To get over this issue I think the ISI should introduce a charge of €50 for accessing the register which will ensure only people who need to access the information will do so.

High loan repayment levels

The survey showed that over 71% of peoples mortgage repayments were over 35% of their net monthly income. This reflects the fact that people are still very much over borrowed and not being able to partake in the normal activities of an economy because they are paying too much in loan repayments. This is a very worrying fact since there are large numbers of people on interest only loans as well as very low trackers. If interest rates begin to rise and interest only periods end there will be more trouble ahead for both lenders and borrowers.

Personal Insolvency guidelines Launched


Last week we saw the official launch of the Insolvency Service of Ireland which included the new web site www.isi.gov.ie, ISI information line, guides to the three types of insolvency, guidelines on reasonable standard of living, expenses for insolvent debtors and limited information on authorisation and regulation of insolvency practitioners.
The living expenses guidelines have been widely leaked over the past few weeks as I have previously written there are no significant changes from the leaked details. However, emphasis has been stressed on the flexibility of the guidelines based on the personal and family circumstances of the Debtor. There is a section in the guidelines, which discusses “special circumstances” which may apply to a debtor when the PIP is assessing reasonable expenses. Such special circumstances could apply to someone who has an elderly relative living with them.

Clarification of the allow ability of childcare expenses was given after the recent leaks. As Enda Kenny recently said in the Dail there is no question of childcare expenses not being allowed for a person applying for an insolvency arrangement. Minister Shatter confirmed this today at the launch and denied any political pressure to change that particular section.

The website includes examples of the three types of debt settlement – Debt Relief Certificate, (DRC), Debt Settlement Arrangement (DSA) and http://www.isi.gov.ie/en/ISI/Pages/PIA (PIA).

In one of the examples it is suggested that a debtor would receive a write off of 40% of a home loan whilst keeping the home. When I asked the minister about this and his confidence that banks would agree to such an agreement he assured me that banks would fall into line, that they will work the legalisation and he himself will be keeping a watchful brief on what they are doing.

The guidelines on Reasonable Living Expenses (RLE) address the issue of what are reasonable expenses when assessing a debtor’s disposable income. This will determine what they will be able to pay to creditors for the duration of the agreement. There is little change to the expense levels, which have already been discussed in previous articles here by myself and others. The head of ISI Lorcan O’Connor was at pains to point it that the guidelines for reasonable expenses are just that, guidelines to assess what people can afford to pay creditors. There is no question of expenses being micro managed as this is in nobody’s interest.
The launch included for the first time limited information on who will qualify to be a Personal Insolvency Practitioner (PIP), how they will become authorised and what regulation they will be subject too. There is a provision in the Act that all practitioners must have an indemnity bond in place of €600,000 to protect debtors and creditors from malpractice by the PIP.

However, these details have yet to be finalised. The PIP will also have to have experience in insolvency and will have to complete an exam in the insolvency process. A potential shortage of such suitably qualified professionals may be an issue in the short term.

It is clear that from the outset of this process the PIP is going to be a vital part of this process and will have significant input into the success of any arrangement and the overall success of the insolvency service.

Throughout the launch both Minister Shatter and Lorcan O’Connor were at pains to point out that the insolvency process is about putting people back into a solvent position in a fair, flexible and equitable way.
So the information and guidelines have finally arrived now it is time for the real work to begin and for the ISI to get up and running. It was confirmed that the ISI will be up and running at the end of June and they will have appointed the first PIPS at the beginning of June. Let’s hope they are ready to cope with the inevitable rush of debtors they are going to be faced with for the foreseeable future!

For those who have been suffering from this financial cancer there is now light at the end of the tunnel even if the light is up to 6 years away. The shame of all this is that if the problem was addressed appropriately 5 years ago people would at this stage be out of the process and who knows how our economy would have recovered by now.

Why Reasonable Expenses Will Be Reasonable for Personal Insolvency


The past few weeks have seen the issue of what is “reasonable expenses” and who is going to decide what they are, regularly debated over the airways when it comes to the new personal insolvency act which is coming into operation in June.

The current ‘spin’ is all around making people feel that they are going to be turned upside down and every penny that drops out will be taken and given to the banks. This is of course yet another story the banks love the public to hear so they get scared of thinking about using the insolvency act. However, though the guidelines for reasonable expenses have yet to be published by the Insolvency Service of Ireland (ISI), I do not expect that any such shakedown is going to happen to people who find themselves in such difficulty that they have to declare themselves insolvent.

There are a few things that need to be made clear about the new personal insolvency act that will hopefully put people at ease in relation to its use and what it is really intended for.

The first clue is in the name “personal insolvency act”. The act is intended for people who find themselves in debt, to be given a mechanism to get themselves out of debt in a reasonable time with some payments to creditors where possible. It is not intended for the banks to be able to shake down people for everything they have and a bit more (though the banks would like us to think that). Yes there is a kind of veto held by the bank who is owed more than 65% of the total debt. However, that will usually mean that the biggest creditor will have the most to lose if a deal is not done. How often have we heard the more you owe the banks the more they want to do a deal with you? Well this is finally going to reach the ordinary man in the street. So making reasonable expenses unrealistic for people to live will not do anything for the capacity of people to engage with the banks to come to an agreement.

The second thing is to look at the personal insolvency act from the banks point of view (not from the bank spin). It is an opportunity for them to clean up their act and balance sheet, come clean on the extra ordinary amount of bad loans which will have to be written off, get good PR by saying they are supporting the use of the act and most importantly it is an opportunity for them to generate a lot of very much needed cash (and looking at the most recent Bank of Ireland financials it is very very much needed cash!). They are going to generate cash from two sources where they would not otherwise. In the first instance where there are buy to let properties in a portfolio of a person using a personal insolvency agreement these properties will be sold therefore generating the banks immediate cash which otherwise would not be generated. This is the case even if the sale proceeds are lass then the loan amount. Generating 60% of a loan outstanding  and in significant arrears is better than generating 0% which is what is happening right now. They will also benefit from the cash being paid by the Debtor over the lifetime of the personal insolvency agreement.

So it is in the bank’s interest to keep the debtor on side and not too squeeze the life out of them. The banks will not admit it but they need customers and ALL of the people who enter into personal insolvency arrangements will be their customers too.

The final point to consider is when a debtor looks at their position and is seeking to use the personal insolvency act it is likely that in reality they would be better off if they did just declare bankruptcy and not have any commitment to pay any amount over a 6 year period. Yes they would lose their family home and all other significant assets. However, they will lose their other assets anyway in a personal insolvency arrangement and considering the current property market if they do a deal with the banks on a write down on their family home they will possibly still be carrying a small portion of negative equity. So this is not a fantastic ‘get off the hook’ scenario for the debtor as being peddled in some quarters. The banks are very aware of the fact for most people bankruptcy could be a better option but a disaster for the banks and so in the end they will corporate with debtors going through the personal insolvency process because as much as it is seen as a mechanism for the survival of the debtor it is equally as important for the future of the banks.

The ISI is aware of the fine balance needed to engage all parties in the act and in reality it is the Debtor who is going to have to be kept on side for the recovery of the economy and banks. So reasonable will be reasonable!

Debtors need to keep in mind power is numbers and there are going to be very significant numbers going through the insolvency process so there is no need to give in to the shakedown!

 

Paul C Carroll FCCA

Personal Insolvency Expert

www.neofinancialsolutions.com

IFB Bankers Protocol – Debt write off is finally here!


The Irish Bankers Federation (IBF) published a protocol on unsecured debts yesterday to address the biggest household debt crises ever to visit our state. The cost of addressing the household debt could be in the region of €15b to €20b and the bankers’ federation have addressed the issue with a TWO page protocol document! That fact alone demonstrates their total contempt for the issues that face Irish households.

The IBF attempt at addressing the unsecured debt issues with this nonsense of a protocol is merely an attempt to keep people paying their excessive mortgages which the banks gave them in the first place and which they are eventually going to have to write down (not postpone, split or any other fake forbearance).

The very FIRST point in the protocol is that ‘mortgage debt will be prioritised’! Well that is very interesting for a protocol which is meant to address the issue of unsecured debts!

The protocol goes on to suggest that a creditor should give consent to all of their lenders to get together and ‘arrive at appropriate agreements’! Does IBF think we are all stark raving mad? To think that anyone would be crazy enough to believe bankers would do anything but look after themselves in such a process is be utter nonsense.

Let’s be honest the IBF protocol is a last ditch attempt to avoid the inevitable of having to take responsibility for the unmitigated disaster their members created in the mortgage lending market over the past 15 years.

However, there is one very significant positive in the protocol and that is that the IBF have finally acknowledged that debt write off is here and necessary in order to get us out of the crises. Of course the mention of debt write off is couched in obscure language like ‘creditors will discharge the customer from residual unsecured debt’ but it still means debt write off is here and the IBF have finally acknowledged it. This is a first step in a very long road that should have been taken five years ago.

So as usual we have the bankers coming to the table but kicking and screaming all the way and in a last ditch attempt to still keep some control they produce this shambolic protocol which attempts to hijack the already introduced Personal Insolvency Act. Their attempt at this protocol only shows further their contempt for their customers who they made so much money from over the years and whom now they are going to have to give debt write offs too.

The protocol is a document produced out of fear that no matter what debt forgiveness is here and it is slipping from their control.

 

Paul C Carroll

NEO Financial Solutions

Irish Examiner on the Insolvency Guide


http://www.irishexaminer.com/ireland/rise-in-suicides-due-to-debt-not-social-media-finance-expert-219588.html

 

2013 time to MOVE ON


The arrival of 2013 has brought some welcome good news if not seismic (unless the news is being described by our Enda Kenny!). The increase in customer spending over the Christmas period, the reported slowing down of the property crash and today the announcement by PTSB that it is to dip its toe back into the lending market in 2013.

 

However, the biggest thing to happen which will make the single largest contribution to the recovery of the Irish economy and restoration of the dignity of the Irish people is the passing of the Personal Insolvency Act 2012. If the banks participate in the insolvency process as it is intended and promised by the minister of justice, it will bring dramatic relief for ordinary people stuck in a household debt trap. It will give those ordinary people the opportunity to ditch most of the excess debt while securing theirs family home and their dignity. The physiological effect of this alone will boost the ability of people to think of other things rather then their debt burden. It will free them to begin to live again knowing that they have down the best they can regarding their debts and now they can move on.

If anything, what Ireland needs in 2013 is to “MOVE ON”. It has become obvious over the past 5 years in Ireland that nobody is willing to take a real hard look at what has happened  to the country because those who need to look are the ones to blame. So what needs to be done now is for everybody to move on. People need to stop looking to have someone to blame for the depression. Banks need to move on and start taking the hits on household debt that they a mostly responsible for in the first place. Bank negotiations should not be so difficult. The political and professional classed should start adding value to the country and stop feathering their own nests like they have been doing for so long.

Ireland is a small county and so easily fixed. We have generated tremendous political respect over the past few years in the way we have tried to deal with our problems. Now it is time that some of that respect is felt by the ordinary people through household debt relief, realistic bank negotiations, proper and full implementation of the Personal Insolvency Act.

Sometimes we forget people are the economy and if we provide people with the ability to survive they will do that and grow bigger, stronger and drive on the road to recovery. That road is in front of us and people want to get on it but they need help. MOVING ON will be the catalyst and our saviour!

Paul C Carroll FCCA

NEO Financial Solutions

Mortgage arrears on the increase and simple solution being ignored


All of the comment yesterday and this morning on the current mortgage arrears situation miss one very important point and that is the significant number of people who are not yet in arrears but who will be in the coming months. The number of people who come to see me who are not yet in arrears is still rising and is of great concern since they are not in any of the arrears figures published yesterday.

Despite what the banks and government want us to believe this problem is getting bigger and nobody is taking it seriously enough to stem the tide. In the Irish times today David Hall of Irish mortgage holds association makes this same point better then I could and has been for some time.

In my recent interview on RTE I spoke of the current environment being different and nothing like what we have seen before. Well it seems to be getting worse through lack of action not because of lack of solutions. In fact since that interview solutions have dried up, banks have been given instructions by the central bank and government NOT to do any deals for debt forgiveness with borrowers. This is the continuation of the government policy of looking after the fat cats and make the people in trouble or most vulnerable pay more.

The upcoming Personal Insolvency Legalisation has been tainted by the fat cat banks and been allowed by the government. So if the banks do not play ball then the legalisation will be another failure for a government which has turned its back on the ordinary people.

It is obvious to everyone that there is a massive household debt problem here which is holding back the people economically and emotionally. This needs to be addressed and quickly. Our leaders should hop on the government jet and head not to Brussels for fancy meetings and dinners but head west to Iceland where they have solved the household debt problem simply and quickly. The Icelandic government nationalised their banks (as we effectively have done) then instructed them to write down all home mortgages to 110% of the property value. This had the effect of releasing the ordinary people from the excesses of massive household debt and in turn helped their economy to become the fastest growing economy in the western world.

Not only that but after having had to let their banks go bust and default on major loans they have successfully returned to the bond markets. The bond traders know how to get their money back when a default happens and that is to lend again! This is something which seems to have passed our government and their advisors by.

The mortgage arrears problems are not going to go away with tinkering around the edges. If the tinkering continues the economic disaster we are experiencing will only get worse! And it looks like that is what is in store for us for a long while!

 

Paul C Carroll

www.neofinancialsolutions.com

AIB finally waking up to Debt Forgiveness


 

I read in the IrishTimes today that the head of AIB arrears support unit Garry
Stran has finally admitted that there is going to have to be some sort of household debt forgiveness. This is what some of us have been saying is so necessary to get this county off its face and back on its knees for a long time. AIB seems to be the first to come out of denial!

If the article is to be taken at face value and I have no doubt to believe otherwise and PAMELA NEWENHAM is a very creditable journalist, this will have the single biggest impact in kick starting our broken economy. This will mean much more then not paying the €3.1b Anglo bond, increasing taxes and introducing massive cuts.

If the banks finally realise that they have to free people of the massive household debt burden, which THE BANKS ARE RESPONSIBLE FOR GIVING THEM IN THE FIRST PLACE, it will have a massive effect on the confidence of people and give people a little hope for the future.

The hope effect for people will be so important to everyone because it will give people the confidence they need to get back into the market buying again. This will directly effect those who do not receive debt forgiveness as much as those receiving it.

For these who do not need debt forgiveness YET stopping the rot and economic disaster we a currently experiencing is even more important for them as they probably have assets to protect. If this current situation continues they too will be left with nothing.

I am however amazed that this story has not been headline news in the media today. Hopefully this will change as we get through the day but the importance of this cannot be understated.

Mr. Stran outlines the banks plan in relation to engaging with people who have been cooperating and trying to sort out their problems. “If they cannot pay they will not be forced too”! How refreshing is this? Someone talking since at long last, willing to look at the problems and provide a solution. This will be a solution for both customer and bank because both are being crushed by the problem. For both to survive the issues has to be addressed and the quicker the better.

I understand AIB have trained up over 300 new staff to deal with the issue and hopefully we will start to see the benefits of the new policy in the new year. Lets also hope the other banks get some sense and start dealing with their problems in a similar way.

Paul C Carroll
NEO Financial Solutions
paul.carroll@neofinancialsolutions.com

Ireland Financially and Morally Bankrupt


So at long last the EU Commission and government is about to admit (again) that things are not getting better in Ireland (unless you are part of the political and professional elite who continue to rip our broken economy off). They are now admitting what we all have been experiencing for the past 5 years and will continue to experience while these fools are still in control of your country. And worse still is that they have revised their figures on growth 3 times in the past 6 months ….. all downwards! It seems that these people are clowns and just cannot do their job!

We still have falling property prices, falling income, no sign of urgent action on the household debt problems, refusal to address excessive pensions and salaries, increasing prices of utilities and anything else the government has its hands on!

Being the “good boy” in the Euro class has cost us dearly. It has robbed us of 4 years in the fight to overcome this Great Recession, cost us €64b in bank debt, given us unemployment approaching 20% and massive increase in immigration again!

We now need some simple but radical things to be done which include the immediate cutting of excess salaries and expenses of public servants to ensure nobody is paid in excess of €100,000, pass a law to have excessive pensions cut, a financial transaction tax should be introduced immediately, the utilities under control of government should be made reduce prices and immediate introduction of a debt forgiveness programme for anyone in negative equity! There a many more things to be done but these are starting points and targeted at the people at the top, those who are responsible for the mess and assistance for those who are suffering the most.

But I have no confidence in anything being done that will make things better and more fair! The main reason for this is that as long as the people in control and advising are the people who gain most from continuing to encourage the financial bankruptcy of the country we will be doomed to fail!

The people whom we have been brought up to trust and rely upon from priests to politicians to professionals have all slowly reduced this country to bankruptcy both morally and financially and it seems the majority of people seem to be happy to do nothing about it! I just wonder how long this will stay and when will people finally realise something needs to be done apart from talking about it?

Paul C Carroll FCCA
NEO Financial Solutions
paul.carroll@neofinancialsolutions.com

Bully Boy Banks I have been a victim too!!


Bully Boy Banks I have been a victim too!!

 

Are you being bullied by your bank? Well it would seem you are not alone. According to an article in The Independent today by Charlie Weston banks are trying to set spending levels for their customers who happen to be in trouble with their mortgages.

Like every bully when allowed to carry on their oppressive and aggressive tactics they will thrive. They pray on the weak and vulnerable who feel they have not got the position of strength to stand up to the bully. The bully will pray on this perceived position of weakness and will push to endless limits with sometimes fatal consequences.

I am afraid to say I have myself been the subject of such bullying from the very same banks who I challenge on behalf of our clients every day. I say “I am afraid to say” because I know now the only day to deal with them is to stand up to them, bully them back, tell them to get lost and take control back by telling them what you are prepared to do rather then what they want.

My personal experience has thought me a great lesson in dealing with the bully and how to overcome their oppression. They hate anyone who will stand up to them. When your weakness becomes your strength they run, they become passive and simply skulk off looking for another victim.

Banks are no different, stand up to them, push back and they will back down. So do not let them tell you what you can spend, who you can pay, where you can live. These are your choices and for you to decide. The bank only have their interests at heart, you however, have to consider your family, your future, your health and your future financial security. The path you take should be with these in mind and not what he Bank considers you should do.

So do not let the bully have its way. Stand strong because it is your life and your family.

They are being taken on and people are winning so become a winner today!

Paul C Carroll FCCA

www.neofinancialsolutions.com