Many of us dream of owning our own home or even our own car. In the current recession it may just remain a dream but for the lucky few or should that be the thrifty few, it remains a real ambition. Provided that one can control one’s debts, and have a reasonable level of regular income then it is possible to go from owing to owning. There has been a huge growth in personal indebtedness over the last ten or more years. It is generally agreed that the use or perhaps more accurately the misuse of credit cards is largely to blame for consumers getting into debt which may be beyond their ability to repay. It is not the credit card in itself that is at fault. It would be irrational to assign the blame to a piece of encoded plastic. In truth the blame lies with us who borrowed too much money and with the credit industry which extended too much credit to us. Neither we the borrowers nor they the lenders paid anything like sufficient attention as to whether we could repay our debts.
If we want to own rather than owe then our first goal must be to get out of debt. Getting out of debt depends on many factors and the most significant is the amount of our debts. Almost as important is the level of our regular earnings and our family living costs. If we already have assets then we have a head start even if the assets consist only of the net equity in a property such as the family home. Another important factor to be considered is the standard of living we want to enjoy. If we set the bar too high, then owning may remain just a dream forever.
Where we live might also be a factor. Pity those who live in the Republic of Ireland for example. Find yourself in serious debt there and it can be a life sentence. The bankruptcy laws are so outdated that very few people are bankrupted there anymore. The cost of bankruptcy is prohibitive and the procedure is rightly regarded as complex and bureaucratic. The option of an Individual Voluntary Arrangement (IVA) is not available in Ireland either. Successive Irish governments have failed to act to provide such a solution fully twenty five years after it was introduced in the UK. Having said that there might be a way for Irish citizens to deal with their insolvency outside of Ireland and we will return to this at the end of the article.
The only real option available in Ireland if we are insolvent is to agree a Debt Management Plan with our creditors. Advice may be obtained from MABS the government funded Money Advice and Budgeting Service in setting up such a plan. Alternatively, a specialist Debt Management provider can set up and manage our Debt Management Plan. For a fee such a provider can negotiate with creditors and make your monthly payments to them on a pro rata basis on our behalf. We simply make one affordable monthly payment to the provider who distributes it amongst our creditors. The charge for such a service varies from one provider to the next, so it is advisable to shop around to get the best value. There are downsides to a Debt Management Plan. For a start it can last indefinitely and it would not be unusual for a Debt Management Plan to last ten years. There is no guarantee that creditors will agree to freeze interest or penalties. Furthermore, creditors can still take legal action to recover the debt at any time. This is because there is inadequate legislation governing the operation of debt management plans. From a creditors’ point of view however, they can expect to recover all of the debts in time.