Bankruptcy is proving popular for a fresh start


All of our 20 clients who have gone through the bankruptcy process since the beginning of 2014 have expressed delight with their new found debt freedom.

Assignee meetings

After a few initial hiccups with bank accounts all has been plain sailing. Assignee meetings have take place for some of the people which have been conducted in a very professional and understanding manner by the ISI bankruptcy staff. These meetings have been very straight forward with all of the necessary information being supplied to the ISI by NEO Financial prior to the meeting making the meeting as short and painless as possible. There has been some emotion and tears both expressions of relief that the debt stress is now over!

Family Homes

Some people have already sold their family home so for them there has been on issue regarding trying to keep the family home. However, any negative equity remaining after the sale of the family home is now gone.

For those who wish to keep the family home that has not been a problem for the clients who are in this position. They were given clear advice on the process and the fact that they were able to keep up any mortgage payments has been vital in the process. There was no equity in the family homes that are being retained and so the assignee has no interest in confirming his interest in the home. Arrangements are being made to have the assignees interest passed back to the owners with legal fees having to be paid for the paperwork to be completed.

Income

For all of the clients who were made bankrupt their income was less than the reasonable living expenses guidelines as outlined by the ISI for families of their size and make up so there is no question of any payment order being made and unless there is a very significant change in circumstances there will be no such payment order during the 3 years in bankruptcy.

It has been important for us to point out to clients that eh bankruptcy period is 3 years and not 5 as some opponents to bankruptcy keep pointing out. The period can be extended if the circumstances permit. These circumstances are limited in nature and would not apply to many people.

Independent Advice

I cannot stress how important independent advice and plenty of knowledge is the key to a successful debt resolution process. And in a lot of cases solutions like PIA or DSA extending over 5-7 years are not practical nor in the interest of the Debtor and therefore should be avoided.

Liberation

Bankruptcy can be and has been for many this year already the liberator they are looking for. It can be liberation from the shackles of debt, banks, unscrupulous debt collection agencies and solicitors. The bankruptcy process and the assignee is there to assist the debtor and keep unscrupulous creditors away from the debtors. Once a client enters bankruptcy the creditors are not allowed to contact the debt and protection is in place. This alone, for many debtors has been a relief and stress reliever.

 

Paul C Carroll

Bankruptcy and Insolvency Partner

NEO Financial

www.NEOFinancial.ie

Phone: 01 437 0908

 

Insolvency Guide on Amazon


insolvency uncovered kindlePaul Carroll’s top-rated easy to understand guide to Personal Insolvency is now available on Amazon: http://www.amazon.com/Guide-Personal-Insolvency-Ireland-ebook/dp/B00DVJLPME.

Revised Code of Conduct on Mortgage Arrears ………….. Could be an opportunity to Borrowers to stand up to the Bankers and do a Mr. Drumm on it with keys rattling in your pocket!


Once again a government agency (the Central Bank) seems to give in to banking pressure by updating the code of conduct for dealing with mortgage arrears seemingly in the banks favour. This, in a week when we have been subject to hearing the arrogance of the same bankers when they themselves were facing ruin.

However, maybe it is time that the people of Ireland who have mortgage difficulties (some 145,000 of them or almost 25% of the mortgage holders in Ireland). use this change in code and face down the bankers who are going to be calling and contacting people more directly and more often?

Tell them as it is, that if they do not do a deal with you that you will be doing exactly what Mr. Drumm (and I have not doubt all other bankers threatened) and throw the keys back at them! And just look at what that threat got them, €64billion and counting.

Troubled mortgage holders have just been too nice about this mess. They find themselves in difficulties because the bankers were greedy and dished out money like it was free. Making up any kind of product so they could give people more money than they could ever afford to pay back. This was not because they were nice people or because they wanted to see everybody own their own home…. It was because they were making money and lots of it! And they still are greedy and need to be thought a lesson.

Bankers created interest only loans, low tracker mortgages, 110% mortgages, etc all of which the people of Ireland are saddled with. Well it is now time to hand them back to the bankers, tell them how it is you are not paying any more unless they are willing to share the pain. As Mr. Drumm said let them have some skin in the game or they can have the keys!

The implementation of the new insolvency legalisation and the updating of the bankruptcy laws mean that people can walk away. In doing so most people will see very little effect on their lives and possibly see a major improvement in their health without the stress of being kept down with massive debt. The banks know this and are scared that people will begin to stand up to them.

 

Paul C Caroll

TV3 – Midweek


Central Bank New Debt Resolution Plan


The Central Bank’s new plan for assisting distressed borrowers to get out from under their excessive household debt is, if it works, a welcome addition to the growing (though still largely unimplemented) suggested solutions to the debt cancer that has riddled households throughout the country.

The pilot plan is mainly focused on those who will not qualify for the new Personal Insolvency legalisation because they are not insolvent although they may be having difficulties paying their loans. This would typically include someone who has a home mortgage but not in negative equity and have some other unsecured loans such as credit union loans, credit card debts and/or term loans.

The new pilot plan will, with the assistance of a service provider (SP), bring the lenders together and agree a temporary restructuring of the payments, term and sometimes interest rates on all loans to bring the payments down to a manageable level until such time as the Debtors situation has improved or the loans are cleared. However, the new plan does not envisage any significant write offs of loans and any small write offs of debt will only apply to unsecured debt.

In fact of the 8 scenarios outlined in the debt resolutions “waterfall” in the Framework for a Pilot Approach to the Co-ordinated Resolution of Multiple Debts owed by a Distressed Borrower there is only 1 scenario which envisages any possibility of a debt write down. All of the other scenarios include restructuring however there is interest being charged on all debt of between 4.5% and 9% depending on the debt and level of distress. This is hardly a good deal for the borrower …. as usual!

The level and type of debt that currently exists in households throughout the nation would suggest that this new plan is not going to be a significant problem solver. It will address some small limited cases but not the vast majority of cases where nothing but significant write downs of home loans will provide a solution for the majority of debtors struggling to survive never mind pay their unsecured loans.

The new plan is an indication again that the banks are being pushed slowly towards the cliff of debt forgiveness. Eventually they are going to have to take that leap which will mean that their recapitalisation will happen as discussed in the recent IMF report. This re capitalisation which will be funded by the ECB (not the Irish tax payer) but will have a direct and positive impact on the taxpayer unlike the previous bank bailout which crippled us.

So it looks like we are back to the personal insolvency legalisation and personal insolvency practitioners to get the solutions for people in real distress with their debts. This is where the resolution is and hopefully the insolvency service will be up and running in June as promised so people can finally get long term resolution to their debt problems. And be assured the long term solutions will include significant write off of debts!

 

Paul C Carroll FCCA

Personal Insolvency Partner

NEO Financial Solutions

paul.carroll@neofinancialsolutions.com

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