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.


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 Survey – Press Release

press_releaseResults of the survey “Getting a clearer understanding of people’s perceptions on the Personal Insolvency Act” announced.

Click the image to download the Press Release.

Insolvency Guide Updated

Updated Insolvency Guide Released

The first version of Paul’s Guide to Personal Insolvency in Ireland had over 1,000 downloads within 2 days of publication.  Feedback was excellent, and has led to a review and some clarification on a number of issues.  Paul has now released an update to the publication which is available for download to registered users – please complete the short form below and you will be sent a link for direct download.  Registered users will be notified of any significant changes.

Sunday Times Money: Finding a way back to black

sunday times

As the launch of the insolvency service draws near, specialists look at scenarios that debtors may face

Niall Brady, Sunday Times –  Published: 28 April 2013

Debtors must wait until the Insolvency Service of Ireland (ISI) opens for business at the end of June to discover the extent of debt relief that will be available from banks and other creditors.

Debt experts are studying how the proposed insolvency regime will operate, to ascertain how unsustainable debts will be treated.

We asked two debt experts, Paul Carroll of Neo Financial Solutions and Steve Tennant of Grant Thornton Debt Solutions, for their opinions of what our sample debtor might expect from the new system.

The sample debtors

Peter and Alice had a family retail business and in 2004 they decided to move house, taking advantage of the strength of their thriving business. They sold their old home and, with a new mortgage of €500,000, they bought a new home for €1m.

By 2009 their business was struggling. It had run up a €70,000 overdraft and owed €30,000 in unpaid taxes to Revenue. The couple’s bank wanted to convert the overdraft into a term loan of €100,000, giving them enough to pay the Revenue arrears.

The bank insisted that Peter and Alice gave personal guarantees to secure the loan. After 18 months the business failed, leaving Peter and Alice owing €100,000 to the bank and €100,000 to creditors, which they had also personally guaranteed. The couple have unsecured debts of €25,000, comprising a credit union loan of €15,000 and credit card borrowings of €10,000.

Since the business folded, Peter and Alice have secured employment. They earn a combined income of €6,200 a month after tax and including child benefit for their children, aged 10 and 16. They have taken steps to reduce spending.

They are unable to pay their mortgage and contribute very little towards their other debts. The value of their home has fallen to €300,000, putting it into negative equity.

At their current debt levels, there is no chance of reaching an agreement with creditors that would be sustainable in the long term. Peter and Alice decide to investigate their options under the new Personal Insolvency Act.

Our experts recommended two different approaches to the debt problem.

Carroll suggested a personal insolvency arrangement (PIA), designed for secured and unsecured debts. This would result in a write off of €303,000 of the debts. Without debt forgiveness on this scale, Carroll believes bankruptcy might be the best option for our sample debtor, even though this would result in the loss of their home.

Tennant believed a debt settlement arrangement (DSA) would be the most likely outcome. DSAs are for unsecured debts only, although they could be used to deal with shortfalls that will result when debtors agree to voluntarily restructure their mortgages with banks.

Under this scenario, only €150,120 of the debtor’s borrowings would be written off.

The extent of debt write-offs will depend on the level of repayments made during the insolvency process, five years for a DSA, up to six years for a PIA. Agreeing these repayments will depend on the allowance made for reasonable living expenses while in the insolvency process.

Paul Carroll: personal insolvency arrangement

As they have secured mortgage debt and unsecured debt (the term loan, business creditors, credit union and credit card debt), a PIA is appropriate for Peter and Alice. It would protect their home while providing a sustainable solution to get rid of their excess debts.

On their income, Peter and Alice could expect to pay 35% of take-home earnings on either rent or a mortgage under an insolvency arrangement. This equates to €2,170 a month, enough to sustain a mortgage of €350,000 over 20 years at current interest rates.

ISI guidelines suggest the family should live on about €5,000 a month, including the revised mortgage of €2,170. Allowance has been made for two cars because they cannot get to work on public transport. The budget also includes private health insurance because Peter has a pre-existing medical condition.

After the mortgage and living expenses, Peter and Alice would have a disposable income of €1,200 a month.

A personal insolvency practitioner would propose that the mortgage be reduced to the sustainable amount of €350,000 — leaving a shortfall of €150,000.

The practitioner would also propose that the borrowings of €200,000 from the failed business and the unsecured debt of €25,000 be written off in full, bringing the total shortfall to €375,000. Under the PIA, Peter and Alice would pay €1,000 a month from their disposable income of €1,200 to their creditors for six years, a total of €72,000. This would reduce the shortfall to €303,000, which would be written off at the end of the PIA.

The payment of €1,000 a month would be distributed to creditors by the insolvency practitioner after the deduction of his fees (expected to be in the region of 15%).

The arrangement would be reviewed annually to take account of exceptional changes in income (a lottery win, an inheritance or redundancy) which might affect the amount Peter and Alice could afford to pay over the course of the PIA.

They would pay the revised mortgage of €350,000 until the end of the loan term. If they sold their home during the PIA for more than the amount owing on the mortgage, the bank could be entitled to up to half of the difference. However, if they delayed the sale until the PIA is complete, there would be no clawback.

Banks have the power to veto a PIA, so why would they accept this deal? Because it leaves them in a better position than if Peter and Alice were forced into bankruptcy. Under this agreement, the banks would receive regular payments for the six years of a PIA, which they would not get if they forced the couple into bankruptcy.

Steve Tennant: debt settlement arrangement

A personal insolvency practitioner would assess the couple’s financial situation and consider their options under the legislation.

It is envisaged the mortgage could be restructured consensually with the bank outside the formal insolvency process.

The unsecured debt that remains after restructuring would be dealt with through a debt settlement arrangement (DSA). The practitioner would set the family’s reasonable living expenses at €2,400 a month after mortgage payments, which would be €250 more than allowed for under the ISI’s guidelines.

The practitioner would contact the bank and agree to split the mortgage, putting €175,000 of the balance on interest-only payments for the five-year term of the DSA. This would reduce the cost of the mortgage to €2,552 a month, a saving of €477 a month.

After paying living expenses and the mortgage from their net income of €6,200 a month, Peter and Alice would have €1,248 left to pay their creditors. Over the five years of a DSA, this would amount to €74,880. At the end of the arrangement, there would be a shortfall of €150,120 of unsecured debt which will be written off in accordance with the legislation.

Repayments of capital would begin on the €175,000 of mortgage debt that was on interest-only for the duration of the DSA, increasing the monthly cost of the mortgage by €711.

Peter and Alice would be better off, however, because the extra mortgage payment would be less than the €1,248 they paid their creditors during the DSA.

For the arrangement to work, 65% of creditors must approve a DSA. This requires the debtor, bank and other business creditors to agree to the proposals.

Paul with Joe Duffy on Liveline

rte-livelineOn Friday 19th April, Paul was back on RTE’s liveline with Joe Duffy.  As the day for the impact of the Personal Insolvency Bill’s implementation comes closer so the concern about what it will really mean for people increases.  Listen to what Paul has to say, and get a clearer idea yourself …

Paul Carroll- liveLine


Personal Insolvency guidelines Launched

Last week we saw the official launch of the Insolvency Service of Ireland which included the new web site, 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 (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.

Paul Carroll back on RTE

olan_mcgowanPaul was back on the Mooney Show on RTE on Tuesday 20th to discuss Personal Insolvency issues with Olan McGowan and in conversation with Andrea Smyth  who told her own story of how her dream unravelled and she fell on hard times.

Paul’s updated Guide to Insolvency has now been downloaded over 2,000 times.  Paul is fast becoming the “goto” expert in this critical area, and his clear common sense approach based on his own experience, his professional background and his empathetic manner is providing some comfort to the thousands of people in Ireland who are faced with their own mountains to climb.

You can listen back to Paul’s interview here:

Paul Carroll- Olan McGowan

You can listen to Andrea’s story here:

Andrea Smyth Bankruptcy Story

Register to download the Guide to Personal Insolvency:

Paul Carroll on Newstalk with Sean Moncrieff

Sean Moncrieff

Debt Restructuring expert Paul Carroll was talking to Sean Moncrieff about the new Personal Insolvency Bill – in addition to some clear explanation of what is involved Paul was able to give an insight into how it may unfold, who it is designed to help and when it is likely to kick in.

If you missed it then it is well worth catching up with – and when you have you may well want to download our updated easy-to-understand guide to the bill.

Paul Carroll- Moncrieff

Paul Carroll on RTE

Paul was recently invited by Derek Mooney to give some advice and experience to his listeners.  The reaction was immediate and very positive – Paul clearly struck a chord with many people.     Read about it HERE, or just listen to what was said.

Paul Carroll- Mooney Goes Wild

Insolvency Guide Published

The Personal Insolvency Act is now Law but with so much speculation in advance, are people confused as to what was actually the final Act?

 An Easy-to-Read Comprehensive Guide to Insolvency in Ireland is now available


A guide to Insolvency in Ireland was launched today, Monday, 14th January.  Written by Debt Restructuring Expert Paul Carroll, the guide describes the various new options available, through the new Personal Insolvency Bill, to someone who is experiencing financial difficulties. It is intended to assist people who are considering availing of such insolvency arrangements and whether such arrangements are suitable for them.

The 30 page comprehensive easy-to-ready guide takes people through how to assess whether they are insolvent or not. In fact, for some people debt re-structuring is more appropriate. The Guide also outlines how to distinguish between a solvency problem and a liquidity problem.  It explains about who will help with the process of seeking protection under the Personal Insolvency Bill and the three additional types of arrangements, set out in the Personal Insolvency Legislation, which are available to solve personal insolvency issues in addition to bankruptcy.  These are a Debt Relief Certificate, A Debt Settlement Arrangement and a Personal Insolvency Arrangement.

Neo Financial Solutions is a team of associates led by Paul Carroll, a certified accountant with 25 years experience in Ireland, the UK and the US.  Neo Financial Solutions has unparalleled direct experience in dealing with evaluating financial situations, proposing manageable solutions, negotiating with banks and creditors, planning and effecting bankruptcy/insolvency solutions in the least damaging way, if absolutely necessary.

Speaking about the Guide, author Paul Carroll, says, “The Personal Insolvency Act is now law, and there was a lot of speculation in advance as to what it would contain. We have many clients who are confused as to what the final outcome was in terms of provisions within the Act. This Guide is aimed at helping people determine their own position in terms of insolvency and is the first step in helping them to decide what they need to do.  Financial worries cause untold stress and now that the Act is law, people can actually have clarity.