Personal finance: Q&A

Your queries answered by DOMINIC COYLE

How will my loan arrears be affected by insolvency bill?

I have a mortgage with Permanent TSB but have run into trouble. I was in a relationship at the time we bought the house, but that has since broken up and I am carrying the full bill.

I am employed but cannot afford all the monthly outgoings. I have also been falling behind in other utility bills.

So far, I have said nothing to the bank as I have been waiting for this insolvency bill. Can you tell me what will it mean for me? Am I going to be able to get out from under all this mess?

Ms AL, Dublin

You don’t say how long you have been in arrears on your mortgage but it strikes me that you have been quite foolish.

As you now know, publication of the proposed personal insolvency regime has been delayed and passage of the required legislation is not now likely until close to Christmas. Getting the apparatus of the regime in place will add to that timeline.

Even if you were only now beginning to struggle, you would need to take steps before the personal insolvency legislation kicked in.

This is particularly so because your bank will have a significant say in whether you can avail of the voluntary debt settlement arrangements in the proposed legislation.

In any case, debt settlement should be a final port of call, not the default first option. It will not be an easy out and, in any case, will affect your credit rating (ie, ability to borrow money for any purpose) for years to come.

Putting your head in the sand with the bank (or indeed the utility providers) is the path least likely to lead to ultimate amicable settlement.

The proposed new legislation, if enacted broadly in its current shape, allows for four different paths for people in financial difficulty. Leaving aside for the moment, judicial bankruptcy – which would see you exit the process in three years rather than the current 12, as long as you play fair with the court-mandated arrangements – there are three non-judicial routes being proposed.

The first two – the debt relief notice and debt settlement agreement – will not apply to people in your position as, while very useful for many people, they do not cover mortgage debt.

That leaves you looking at the final option – a personal insolvency arrangement. This is certainly no easy arrangement and the work-through time, if approved, will be six years – twice the length of time you would be constrained in a bankruptcy under the new proposals.

A second, and very relevant, condition in your case is that such arrangements will require the support of 65 per cent of your creditors. In practical terms, that means the bank must approve the arrangement.