{"id":12840,"date":"2011-03-25T11:58:00","date_gmt":"2011-03-25T11:58:00","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=12840"},"modified":"2020-02-20T12:12:27","modified_gmt":"2020-02-20T12:12:27","slug":"blame-for-my-debts","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/blame-for-my-debts\/","title":{"rendered":"Blame for my debts"},"content":{"rendered":"\n

The Blame Game<\/strong><\/h2>\n\n\n\n

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.<\/p>\n\n\n\n\n\n\n\n

If we want to allocate blame objectively, then we must consider the role of the three main parties who contributed to the problem: ourselves the borrowers, the lenders and the government. And if we want to find a solution to our predicament, we must look to the same three parties to contribute to the solution.<\/p>\n\n\n\n

\"Credit<\/figure>\n\n\n\n

All we did wrong was to borrow more than we could reasonably and \nprudently afford to repay. We assumed that property values would keep \nincreasing, that our income would keep increasing and that our \nemployment was secure for the foreseeable future. All the lenders did \nwrong was to assume the same three things. As for the government, they \nwere also optimistic that the good times would continue indefinitely and\n that light regulation would suffice, with the market controlling itself\n in terms of borrowing and lending. <\/p>\n\n\n\n

As we now know, property values did not keep increasing, incomes have dropped and unemployment is rife. Lenders pushed the limits of prudence in relation to lending and regulation was not just light, it looked away as government buried its collective head in the sand.<\/p>\n\n\n\n

Now, we are where we are and all three parties acknowledge their \ndefective roles in the credit bubble which has led to the massive \npersonal insolvency problems of the 21st<\/sup> century.<\/p>\n\n\n\n

Seeking Solutions in Ireland<\/strong><\/h2>\n\n\n\n

Solving these problems must also be a three way street. From the \nborrower\u2019s point of view, getting out of debt depends on many factors: \nthe amount of our personal debt; how much we earn; the value of our \nassets; our standard of living; our family living costs and even where \nwe live. For people living in the Republic of Ireland, personal debt can\n be a life sentence. The bankruptcy laws are so outdated that very few \npeople are bankrupted there anymore. The cost of bankruptcy is \nprohibitive and the procedure is rightly regarded as complex and \nbureaucratic. The option of an Individual Voluntary Arrangement is not \navailable in Ireland either. Successive Irish governments have failed to\n act to provide such a solution fully twenty five years after it was \nintroduced in the UK. There is some scope for optimism however. The new \nIrish government is regarded by most fair-minded commentators to be \nhonest and free from corruption and to possess the competence and energy\n to address the issues of personal debt urgently.  They are also lucky \nin that the Irish Law Reform Commission has recently published its final\n report on Personal Debt together with a draft bill which needs very \nlittle tweaking to be passed into law.<\/p>\n\n\n\n

MABS & DMPs in Ireland<\/strong><\/h2>\n\n\n\n

In the absence of such legislation being passed any time soon, the \nonly real option available for the insolvent debtor in Ireland is to \nagree a debt management plan (DMP) with creditors. MABS, the government \nfunded Money Advice and Budgeting Service, can provide advice and \nassistance in setting up such a plan. However, MABS lacks the resources \nto assist citizens on an ongoing basis to manage such a plan and it is \nunlikely that government will be able to afford to beef up MABS in the \nforeseeable future. After setting up such a plan, debtors are at the \nmercy of their creditors and depend on them acting with good will over \nmany years \u2013 relying on the kindness of strangers, if you like.<\/p>\n\n\n\n

Apart from MABS, a number of commercial specialist Debt Management \nproviders have set up in Ireland and for a fee they offer DMP services. \nSuch a provider can negotiate with creditors and make monthly payments \nto them on behalf of the debtor and on a pro rata basis. The debtor \nsimply makes one affordable monthly payment and the provider distributes\n this money between creditors. The charge for such a service varies from\n one DMP provider to the next, so debtors should shop around to get the \nbest value. There are downsides to a DMP. For a start it can last \nindefinitely and it would not be unusual for a DMP to last ten years. \nThere is no guarantee that creditors will agree to freeze interest or \npenalties. Furthermore, creditors can take legal action against the \ndebtor at any time. This is because there is inadequate legislation \ngoverning the operation of debt management plans. Creditors however can \nexpect to recover all of the debts over time.<\/p>\n\n\n\n

DMPs & Bankruptcy in the UK<\/strong><\/h2>\n\n\n\n

While debtors living in England, Wales or Northern Ireland can also \nenter a DMP they also have further alternative options. Bankruptcy \nlegislation in those jurisdictions has been simplified in recent years \nand an insolvent debtor can be discharged from bankruptcy in just one \nyear, although he or she may be subject to an income payments order \n(IPO) for up to three years. Downsides in bankruptcy are that the \nbankrupt loses control of assets such as their house. For some, \nbankruptcy may spell the end of their careers. For many, the perceived \nsocial stigma of bankruptcy is a major issue, although in reality this \nis not as devastating as it was historically. The big downside for \ncreditors is that bankruptcy provides a very poor return and they often \nreceive nothing. In Scotland, sequestration is the name given to \nbankruptcy and the relevant legislation differs somewhat.<\/p>\n\n\n\n

The IVA in the UK<\/strong><\/h2>\n\n\n\n

English, Welsh and Northern Ireland citizens have a further legally \ncontrolled solution available to them in the form of an Individual \nVoluntary Arrangement (IVA). Some of the advantages are that interest \nand penalties on debts are frozen; the IVA will usually last just five \nyears, although the term may be shorter or occasionally a little longer;\n the debtor avoids bankruptcy and will usually be able to keep their \nhouse and car although they might have to address any equity therein \nduring the term of the IVA; creditors receive a much greater return for \nthe monies they have lent compared to what they would receive in \nbankruptcy; all legal action is stopped and the debtor is debt free on \nthe successful completion of the (time limited) IVA. There are downsides\n to an IVA also. Under the legislation the debtor must use the services \nof an Insolvency Practitioner (IP). Fees for these services are deducted\n from the monies the debtor contributes to repay creditors. However, \nyour creditors will have agreed these fees up front so there are no \nsurprises for the debtor or the creditors. While the five years term may\n seem long compared to the three years during which income payments have\n to be made in bankruptcy, it is considerably shorter than the usual \nduration of a DMP. If the IVA should fail during its term, creditors are\n again free to pursue the debtor for the full unpaid balances still \nowing and the protection enjoyed by the debtor while the IVA was running\n ceases. In Scotland a Protected Trust Deed is regarded as the \nequivalent of an IVA, although the relevant legislation differs \nsomewhat.<\/p>\n\n\n\n

Looking to Europe<\/strong><\/h2>\n\n\n\n

Under EU insolvency legislation introduced in 2002 i.e. Council \nregulation (EC) No 1346\/2000, it is possible for a debtor to seek and \nobtain a solution for personal insolvency in another member state of the\n EU. For example, an Irish citizen might be able to enter an IVA or \npetition for bankruptcy in England, Wales or Northern Ireland. To do \nthis the debtor would have to be able to show that their \u2018centre of main\n interests\u2019 is in that other member state. The regulation states that \n\u2018the centre of main interests\u2019 should correspond to the place where the \ndebtor conducts the administration of his interests on a regular basis \nand is therefore ascertainable by third parties\u2019<\/p>\n","protected":false},"excerpt":{"rendered":"

There has been a huge growth in personal indebtedness in the last ten years, particularly mortgage debt and credit card debt.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[6],"tags":[],"class_list":["post-12840","post","type-post","status-publish","format-standard","hentry","category-general-debt-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12840","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=12840"}],"version-history":[{"count":2,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12840\/revisions"}],"predecessor-version":[{"id":12847,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12840\/revisions\/12847"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=12840"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=12840"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=12840"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}