Time to ease debt burden on couples separating
OPINION:Negative equity and the intransigence of banks are worsening the trauma of separation
THE LANDSCAPE of divorce and separation has altered dramatically due to the economic downturn, and like most things these days, is becoming more difficult to manage.
The vast majority of people going through a divorce or separation in Ireland today no longer have equity or savings to divide in the process.
From my experience on the ground as a family lawyer, I have to say this is a complete reversal from the norm of five years or even two years ago. It is having a devastating impact particularly for those on middle incomes, and adding greatly to the trauma of separation.
In the boom times, separating couples had options, because it was a simple question of diving equity. This made it easier to move on with their lives. Because most separating couples are now in negative equity and debt, the lack of options open to them is a huge barrier and is leaving many of them in intolerable situations.
For the debt to be divided by the courts or even through mediation there needs firstly to be agreement on the exact value of negative equity or resale value of joint property, and secondly an ability or willingness on one or both of the parties to take on all or part of the debt.
Where decisions are made as to how to divide the debt, they meet the next stumbling block – the failure of the banks to co-operate or act honourably in this process. This is halting separation proceedings entirely in many cases and leaving parents and children with no homes in others.
It’s not so bad if you are on a higher income, and one partner can afford to rent while the other remains in the family home, or both can rent if the home is sold to discharge the bank debt.
If you are on a low income, you can apply for social housing or avail of rent allowance to help with costs. It’s those in the middle who are really stuck. Sometimes a couple whose relationship has broken down are forced to remain in the family home because they can’t afford any alternative – and children can be caught up in the middle of all this.
When property values were high and there was enough equity, dividing the assets offered the partner leaving the home enough to secure a deposit on a new house or at least to rent.
Today, about 75 per cent of those I deal with are in complete negative equity, and all are dependent on the banks in their decision making.
For example, in the case of a family home with a mortgage of €250,000, and both partners working on middle incomes, the bank may agree to sell the home for €180,000, leaving each partner with a debt of €35,000, no home, no means to buy a home, and children to look after. But at least they will have limited income to rent a home, and the means to begin moving on with their lives.
However, if the bank refuses to agree a mechanism to divide the debt, people remain tied together by the burden of a joint debt, which they struggle to pay.
The prospect of a clean break in their separation remains a distant hope only, and very often they are left living together in very difficult and stressful situations, which do not benefit them or their children.
In the interests of families and children, the banks need to have a clear and consistent policy of co-operating with the courts and with mortgage holders and borrowers in the case of divorce and separation.
At the least, a relationship breakdown is a time of crisis in anyone’s life and coupled with high debt levels, it has become a nightmare for many. It’s time to ease the burden a little.
DEIRDRE BURKEis a family law solicitor