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'We need to talk about the reality of debt'

Debt is scary – sometimes scary to face and always scary to hide from, writes Stephen Curtis.

SINCE 2008 DEBT has been a big part of my life. For five years until 2013 I worked in banks mainly dealing with lending and collecting debt. Then in 2013, I jumped to the other side of the fence and started helping people who couldn’t pay debts.

Many commentators talk about solutions and help but very few talk about the actual reality of dealing with creditors. I always try to be honest and realistic with people – everybody deserves to know the truth, especially about matters that will probably imprint the rest of their lives.

So what are the misconceptions? And what is the truth? Read on.

No such thing as a free house

It is a simple fact that if you can’t pay your mortgage or get your lender to agree to restructure it there is a very good chance that you are going to lose it. It is a sad reality that if you have lost your job and are not in a position to make any payments then you will not retain ownership of your home. Maybe not today or tomorrow, but eventually.

The reform of insolvency legislation in 2015 gave the courts the ability to force debt deals on banks. Hopefully this will soften their cough, but if you can’t pay a mortgage of greater than or equal value to the market value of the property keeping it is a non-starter in my view.

Reckless lending isn’t a crime

How many bankers have you seen in the back of a van heading to Mountjoy with a dressing down from a judge ringing in their ears about their stupidity and recklessness in handing out money to people who had no hope of paying it back? None I presume?

That’s because none have gone to jail. Being stupid and giving somebody money who can’t repay it isn’t illegal.

Funnily enough banks have been a bit more conscientious about collecting money than giving it out, but thinking that because the guy (or gal) who lend you the money was a buffoon will get you a free pass is a fallacy.

The bank doesn’t care about you

Anybody in financial difficulty will hear lots of pronouncements about codes of conduct, rules and regulations that lending institutions have to follow in dealing with people who are in trouble.

These documents and lengthy and detailed. The banks have to follow them and risk a telling off from the Central Bank if they don’t. They also cost the bank lots of money and staff to implement. But in reality the bank pays lip-service to these rules.

What is never talked about is that over 80% of borrowers out there are paying their loans back in full. These are the people who the bank cares about – not the minority who are not paying. The 80% generate profits, take out new loans and sometimes have savings and investments. This is what banks like – not a person struggling.

The banks are also petrified that the 80% will think there is an advantage of downing tools even if they can pay and their profits will evaporate – so everything done to help people struggling is done with one eye on the 80%.

I haven’t heard from the bank, have they forgotten about me?

Sometimes people tell me that they haven’t heard from their bank in three months, or six months or a year or maybe even two years. They think that the bank has forgotten about them, or lost their file or decided to just call it a day.

Sadly no, banks are large, reasonably inefficient bureaucracies who have been in a state of schism for the last seven years. The bank hasn’t been on because it is disorganised, not because it has forgotten about you.

Should you contact them? Yes, if you want to deal with the problem and move on. If you want to string out living rent free in your house and have no chance of recovery – stay put and wait for the sheriff.

No judge in the country will throw me out

Sorry, no. In fact every judge in the country will eventually throw you out. A loan contract is fairly simple – bank lends the money, borrower repays. If the borrower doesn’t repay the bank takes the house.

So whilst appealing to the judge’s better nature and trying to delay matters the judge will eventually give the order to evict. Many of the fringe groups especially on social media maintain that they have great victories in the courts. Sadly, this narrative is more effective at getting Facebook likes than actually helping people – they have precious few people, after all the stress and strain, with a set of deeds in their hands and no mortgage to pay.

Nothing will happen immediately and the process can be debilitatingly slow, but unfortunately to go back to my first point, there is no such thing as a free house.

I met the bank and they promised me x

Going to meet the bank can be a cruel exercise in false hope. You won’t meet a decision maker, nothing that is said to you is binding (only what is on paper is binding) and you will get patronised about wanting to help and discussing options.

If you want to know where you stand with the bank don’t go and meet them. Instead fill out a financial statement, put together the supporting documents and send it to them with a proposal. If you think you need help doing this, go and get it.

Debt is scary – sometimes scary to face and always scary to hide from. If you do have a problem with debt get some advice – try to go to somebody who will give it to you straight, tell you where you stand and let you make a decision.

Stephen Curtis is a Personal Insolvency Practitioner. He works with the Irish Mortgage Holders Organisation and is a Director of DFI Consulting.

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