Many people today have personal money worries. Most people want to do something about them, ideally to make them go away. There are various solutions to issues of personal insolvency out there. The problem is when and where to begin. We would like to know how serious our problems are and rate our situation on a scale of one to ten. A rating of one would be a state of being affluent and comfortable with ten being in a state of ‘hopeless’ personal insolvency. Except of course that there is always hope!

When confronted with severe credit card debt situations it’s easy to ignore the consequences of non-payment or late settlement on creditors. The lender is frequently viewed as the big bad wolf and not worthy of any sympathy from the beleaguered person in debt.

The Blame Game

Wanting to blame somebody else for our own financial problems is an entirely predictable and human reaction, particularly in the current recession. There has been a huge growth in personal indebtedness in the last ten years, particularly mortgage debt and credit card debt.

Many of us have personal money worries and want to do something about them. We know that there are solutions out there. The problem we have is that while we know that we need to do something, we don’t know where to begin and so many of us do nothing. We may not even know the extent of our problems or whether we are insolvent.

Many students who expect to graduate this year will have debts of £25,000 or more to dampen their enthusiasm as they seek to enter a less than buoyant jobs market. Surveys have found that half of those graduating expect that it will take ten years for them to repay their student debts while one in ten think it could take twenty years. With tuition fees inexorably increasing year on year, average student debt could rise to as much as £80,000.

Many citizens of member states of the European Union (EU) are blissfully unaware of certain unexpected benefits that EU membership conveys in relation to personal insolvency. These benefits are rooted in the principle of the free movement of labour for EU citizens within the EU and are particularly relevant for those who find themselves overburdened by debt and threatened with aggressive insolvency proceedings in certain member states of the EU.

One of the anticipated benefits of membership of the European Union (EU) is the expectation that Europe-wide legislation will in due course be harmonised so that all twenty seven states will have compatible legislation particularly where it affects the rights of citizens.

Did you know that there are now twenty seven countries in the European Union (EU) all with their own personal insolvency legislation? The mind boggles at the volume, variety and complexities of laws and regulations which this must entail.

If you are unable to pay your debts as they fall due or have fallen behind in your payments to creditors then you can understand what harassment by creditors is. It often starts with reminder letters and overdue letters and if you are unable to make the repayments they require the chasing is ramped up to emails, texts, phone calls and even personal visits to your home or to your place of work or both. Creditors often contract out the more unsavoury parts of the hounding to debt collection agencies.

Role of the Insolvency Practitioner

The work of an insolvency practitioner (IP) is much like that of the dentist. You expect your dentist to examine your teeth (and gums), to explain what needs to be attended to, to outline what treatments are available, to quote for the cost of each alternative treatment and to outline how long each course of action will take.

The IP must treat the debtor coming with a financial problem in much the same way: examine your financial circumstances, set out what needs to be addressed, explain what options are available and outline the cost, duration and effects of each course of action.

In an interview in today’s Irish Independent, the Dublin City Sheriff Brendan Walsh hit out at the proposed reform of Irish insolvency law by calling it unfair because it is ‘very debtor friendly’. He takes a dim view of the extensive and detailed proposals of the Law Reform Commission (LRC) relating to personal indebtedness. 

If you are unable to pay your debts as they fall due or have fallen behind in your payments to creditors then you may have already begun to suffer from creditor harassment. It often starts with innocent looking reminder letters and then slightly more aggressive ‘overdue’ letters.

It could be described as the kindness of strangers but a remarkable event is taking place in Ireland at present. Bank of Scotland (Ireland) – BoSI – which operated the Halifax banks in Ireland ceased trading in Ireland last year and eight hundred of its former employees now manage its remaining mortgage book and other loans working for a new company called Certus. It is estimated that BoSI could have 50,000 mortgage customers in Ireland.

Ireland is suffering – or rather the people of Ireland are suffering. It is not just the so-called working classes but also the (lower) middle classes who have been hit by the economic crisis. Even the business and so-called upper classes are being squeezed by the recession. All towns and villages – as well as the cities – are saying farewell to a generation of young (and not so young) emigrants – well educated but unemployed, who wend their ways to Canada, Australia, New Zealand and the USA as well as to some of the better performing economies of Europe such as Germany and France. Even the UK is an attractive destination for some of them.

Time has almost stood still for Irish consumers as government busies itself in the implementation of NAMA. There has been plenty of talk about how the government is ‘bailing out the banks’. To be fair, the main players in the mortgage market are almost invisible in terms of seeking to repossess homes, even where mortgage re-payment is substantially in arrears.

When financial circumstances get really desperate, sometimes the only choice that people feel that they have is to divest themselves of the assets which are costing them so much that the depth of their insolvency is increasing by the day. They may be considering entering into an Individual Voluntary Arrangement (IVA) or petitioning for their own bankruptcy.

A creditor may seek a judgment against a debtor in an Irish court for non-payment of a debt when such payment is overdue. Where such a judgment is awarded, interest is automatically applied at the statutory rate of 8%. 

It will fall to the new Irish government – widely expected to be a coalition of the Fine Gael and Labour parties – to enact new personal insolvency legislation in Ireland. The Green party has been credited with recognition of the void in Irish law in this area and with pushing the Law Reform Commission to finalise its proposals for change. 

Antecedent Transaction and Transaction at an Undervalue

In the lead up to an insolvency process, it is important that the debtor ensures that he behaves honestly, honorably and fairly in his or her dealings with all other parties who may be affected by the process.

What is a Debt Relief Order?

A Debt Relief Order (DRO) is similar to bankruptcy in so far as it affords relief to a debtor who is insolvent but who has little or no disposable income and few if any assets.  The relief of a DRO is currently available in the UK.