Debt is something that we don’t like to talk about. It’s often spoken about in hushed tones, behind closed doors or perhaps only hinted at.
The truth is, unsustainable debt is a common problem in Ireland today. And one that is set to grow in 2021.
“Most people in Ireland have some form of debt whether that’s a credit card debt, an overdraft or a mortgage,” explains Michael Mc Naughton, Director of the Insolvency Service of Ireland (ISI). “Debt is a normal part of life. The problems arise when people get into difficulty with debt. That is unfortunately pretty common.”
The ISI was founded in 2013 in response to the 2008 financial crisis. It’s an independent government body set up to help tackle personal debt problems.
“There are people who still haven’t recovered from the last crisis because they lost their job and had no means of paying their mortgage for a long time,” Michael explains. “There are other people who are in rental accommodation and they struggle to pay their rent and find themselves in difficulty in meeting their basic day-to-day essentials. It is common.”
The effects of a pandemic
Michael believes the current Covid-19 crisis will have a huge effect on people’s debt.
“Unsustainable debt is more common than it should be but a lot of it is stemming from the original crisis,” he states.
“It has been made worse, and will continue to deteriorate because of Covid-19. Since the first lockdown in March, a lot of people have been unable to work. Some of those people won’t have been able to meet their bills. The government supports have helped but they may still struggle to meet all of their expenses.
“Certain sections of the economy were hit harder than others. We expect to find more people struggling with debt when things get back to normal. They will need help whether that comes directly from their creditors or whether they need to avail of one of the four solutions that we offer.”
Finding the right solution
The ISI is an independent government body.
“We act as a neutral party between debtors and creditors,” Michael states. “We’re there to administer the solutions that will enable both parties to come to an agreed solution. We provide the framework that enables those interactions to take place.”
According to Michael there are four solutions to consider.
1. Debt Relief Notice
If you have a low income, few assets and debts of less than €35,000 that you can’t repay, then a DRN could be the right solution for you.
“A DRN can last for up to three years,” Michael explains. “You enter that DRN for three years. At the end of that period, your debt is written off. For a DRN you take the advice of an Approved Intermediary (AI). They will deal with the DRN and do all the work on that for you. The service is free and you qualify for it on certain conditions.”
If you have a mortgage, a DRN is not the right choice for you.
2. Debt Settlement Arrangement
If you have unsecured debt such as credit cards, loans and overdrafts, a DSA could be the right choice for you. A DSA is a formal agreement with your creditors that will write off some of your debt.
“A DSA is done via a Personal Insolvency Practitioner,” Michael states. “The PIP will negotiate with your creditor, discuss with your creditor and agree what you can afford to repay over a specified period of time. The PIP’s fee is covered out of the money you can afford to repay. At the end of the DSA, the balance of the debt is written off.”
3. Personal Insolvency Arrangement
A PIA is a formal agreement with all your creditors that will write off some of your unsecured debt and restructure any remaining secured debt.
“It’s a solution that helps people that have mortgage debt or secured debt,” Michael adds. “Under the Government Abhaile scheme, if you are in arrears on your home mortgage you can have a free consultation with a PIP to see if a PIA is the right solution for you. ”
4. Bankruptcy
“Bankruptcy is a formal High Court procedure,” Michael states. You have to have debt over €20,000 but it can be any type of debt.
“In bankruptcy your debt is written off. Typically bankruptcy will last for a year. At the end of that year, you’re able to regain a level of financial independence.”
To find out more about how you can handle your debt visit the backontrack website, contact a Personal Insolvency Practitioner or text GETHELP to 50015 for a call back.
