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


AIB Interest rate Increase part of the Enda Kenny “Celtic Comeback”??

The increase by AIB in their mortgage interest rates last week is another element of the scam that is continuing in this country by the elite professional and political classes. These classes are described so well in the recently published book by Shane Ross and Nick Webb The Untouchables.

Another element of the scam is that we must continue to pretend that things are getting better in Ireland. The economy is recovering, people are slowly recovering, property prices are stabilising, unemployment is stabilising, etc..  This is being peddled because it is important for “the Untouchables” to create this illusion about Ireland being the Good Boy in the class of austerity so their position of overpaid offices and professional fees continues.

How on this earth can it be justified that the bank owned by the state is allowed to put up interest rates on people who are already struggling except for the creation of an illusion that AIB will recover. We all know that the increase in the interest rates will make AIB worse and not better. It will simply cause more people to fall into arrears. It may also cause some people to reflect on why at all they should be paying anything on a loan which is possibly in excess of 50% greater then the value of the property it is on! Why Bother? Why Bother?

It seems the chief driver of the scam is none other than our leader and poster boy of “the Celtic Comeback” Enda Kenny. He is on the front of Time Magazine peddling the comeback scam and today insists that AIB are right in increasing rates to ensure its recovery! What about the recovery of the people? What about the Celtic Comeback of the people? Or do the people not matter as long as AIB and the other Untouchables are looked after? Is that what Mr. Kenny considers a comeback? AIB, BIO, Anglo, PTSB, EBS and Nationwide can all have debt forgiveness but the ordinary person cannot that is a comeback? I do not think so Mr. Kenny!

In the interview by Mick Wallace TD on the Marion Finucane Show on RTE radio 1 he said that one of the things that strikes him most about the Dail is how out of touch most people are there! Well it seems he is right on that one and the more Mr. Kenny goes on about the comeback the more Mick Wallace is right! Somehow we need to drag these guys back into the real world. Let them sample the “comeback” and see how it feels!

There can be no comeback unless excess household debt is addressed, the real level mortgage arrears are admitted to and the national current account deficit is addressed.

Paul Carroll FCCA


NAMA are in the process of selling properties at LESS than they are being offered.

Yes it is true NAMA are about to embark on a disposal of a limited number of properties but at less then what they are being offered and at the same time incurring large amounts of professional and legal fees in doing so. Thus having the effect of INCREASING losses on loans!

Today, I was contacted by a man who had an investment property on which he owed €2.4m to Anglo (now IBRC). The building cost him €3.2m and so he had all of his personal wealth in the building of €800,000. He could not keep up with his loan repayments and so NAMA appointed a receiver. Since the receiver was appointed the rental income from the property has halved. As with every case I have ever been involved with as soon as a receiver is appointed the value of the asset and income associated with it collapses. This case is no exception. It is with amazement that I see banks have not gained that simple knowledge too.

Now NAMA are proposing to sell this same building for €300,000 even though the original owner tried to renegotiate a restructuring of his debt to a level which would be more sustainable and guarantee NAMA treble the return which they are now willing to accept. Not only are they denying a man and his young family a chance to regain some of their losses but also they are denying the Irish Taxpayer a better return for its massive investment in NAMA.
When NAMA are questioned about this they say they have been given a mandate by the GOVERNMENT that there is to be NO DEBT FORGIVNESS! Yet they are willing to take less for a property then they are being offered and write off the larger amount! They have no chance of getting anything else from the man who called me because he has nothing else to give! What is this achieving except generating fees for the professionals and misery for people who are the ones who can get Ireland out of this mess?

This man has done nothing wrong except make an investment which went horribly wrong in an extraordinary time. He did not borrow money with the intention of not repaying it, he has not transferred assets to his wife or children, withheld taxes or defrauded the revenue. He has not accepted bribes or tried to buy political favours. Yet he is being treated worse than those who have because he is being denied a second chance.

Surely the whole point of NAMA and refinancing the banks is to give people a chance and if that means writing off some loans then let it happen.

Paul Carroll NEO Financial Solutions +353 86 815 2360