Don’t let debt put your life on hold

Follow @PeterDean_debt

Follow @PeterDean_debt

One of the hardest things for families living with unmanageable debt is feeling forced to put their lives on hold while creditors effectively control not just their finances but life decisions, big and small. Whether it is seeking a new job, planning to get married or just being able to buy new shoes, we speak to people every day who feel that they have no control, no options and no hope. 

Knowledge empowers you to regain control

A combination of fear, mistrust and lack of awareness of the new insolvency regime may prevent people from seeking help. Some struggle for years without realising that they are insolvent while others may regard their situation as hopeless. 

There is of course no single solution guaranteed to suit all people in all debt situations but there are a range of insolvency solutions available which may have the potential to:

• improve your financial situation in the near-term
• enable you to work towards a more stable financial future
• give you back some control over decisions affecting your life.

Accessing expert knowledge is the first step towards regaining some control.

Don’t wait for a repossession letter

The first trigger to seeking advice is often a letter threatening repossession - major mortgage arrears are at the heart of most serious debt cases we see. Ideally it is wise to seek advice before you are threatened with repossession but even at this stage it is not too late to explore ways to safeguard your home. For example, a Personal Insolvency Arrangement may be appropriate as it covers secured debt, with some restrictions.

We deal with people at the end of their tether after making futile attempts to persuade their creditors to agree to an affordable debt repayment plan. Negotiating directly with creditors is stressful and difficult especially if you have been the subject of harrassing letters and calls. We have been negotiating with creditors for years which means we understand how to handle what can be a delicate process.

Making sense to return to work

We were contacted recently by a man in his 50s who had not worked for 18 months because every penny he earned was taken by his creditors, not even leaving enough for him to pay his sub-contractors or to meet his family’s needs. He concluded that it would simply not be worth him working again as he would neither be able to clear his debts nor provide for his family so he was living on benefits. He was not happy but could see no viable alternative. After consulting us potential appropriate debt solutions, he called his wife to say that he planned to return to work because he had reason to hope for the first time that it would make financial sense.

Entitlement to reasonable standard of living

We informed him of the Insolvency Service of Ireland’s (ISI) guidelines designed to ensure that people in difficult financial circumstances have enough money each month to meet their needs. The guidelines were drawn up to not only meet people’s basic needs in terms of a home, light, heat and food but also to protect people’s dignity and right to be able to fully participate in society. They are not sufficiently well understood by people who could benefit from them.

The guidelines take into account the size of a family and children’s ages and any special needs. There are allowances for clothing, phone and internet, school uniforms and books as well as modest amounts for social activities like sports events and cinema trips. They do not allow for a life of luxury but nor do they consign people to subsistence. Your debt adviser or PIP will help you to review your family budget, work out essential spending and calculate how much disposable income you have left to pay towards debt.

Discretionary spending

If you enter a Debt Settlement Arrangement (DSA) or Personal Insolvency Arrangement (PIA) you will have a degree of discretion to decide spending priorities for you and your family within your overall allowance. (However, if you enter a Debt Relief Notice (DRN) you will have to stick to specific limits for particular items within your allowance).

In some instances, families that pared spending to the bone before entering a debt solution may find that they are allocated more than they had previously to spend on themselves and their children for items such as clothes and shoes.

Dignity in debt

There is still much hard negotiation which needs to take place with creditors in order to restructure long-term debt, particularly mortgage debt.  However, in the interim, it is important for people in debt to know that there are measures in place to ensure their dignity and comfort while they work towards resolving their debt problem.