Battling credit union over debt repayments

Q&A: I'm up to my neck in debt. I lost my job three years ago. My big question to you is do you know anything about people taken to court by their local credit union and how they got on? Or where could I get information on it? My credit union is not very helpful.

I am married with two kids on €372 a week on the dole and I owe €50,000 to the credit union in several loans, one of which I had to get in my mother-in-law’s name on the advice of the credit union. The thing is both loans are mine, which the credit union knows.

We are expected to pay €70 a week out of our dole which we can’t afford, especially with Christmas coming up. We have to go without a lot. We went to Mabs but they were no help as the woman was too friendly with the credit union. Would you have any advice? This is just one of my debts please help.

Ms JM, email

This is an awful mess but, unfortunately, far from unique. It is a situation that is increasingly a problem for credit union customers.

Many credit unions across the State are now in very serious financial difficulty as borrowers struggle to repay loans, many because, like you, they find themselves out of work.

They are under growing pressure from regulators to get their books in order. They are also distinctly nervous about the impact of the upcoming Personal Insolvency Bill, under which some debtors may be able to walk away from debts they cannot meet, putting further pressure on credit union resources.

In this environment, some are working constructively with customers to achieve this; others, it appears, are being distinctly unreasonable. I am not sure how a credit union was extending loans of €50,000 and I am distinctly uneasy at your comment that your credit union suggested you apply for one significant loan in a relative’s name because of your existing indebtedness to it.

More fundamentally, though I am not familiar with your other financial commitments, I struggle to see how you can reasonably be expected to find €70 a week from your limited resources to meet this debt.

First up, you should ensure any correspondence with your credit union is in writing. Keep a copy of any letters or emails you send them. Keep copies of all written communications to date, together with a note of your recollection of the passage of events, complete with dates, or approximate dates, where possible.

If you do find yourself dealing by phone or in person, follow up such conversations with written confirmation of what was discussed and/or agreed.

Second, set out a comprehensive statement of affairs – what money you have coming in on one side (welfare and child benefit) – and your outgoings on the other (heating, rent/mortgage, food, clothing, medical bills, transport, insurance, repayments on this and any other debt, and any other calls on your income).

If you have not already approached the credit union to restructure your loans, do so with the statement of affairs in hand. If you cannot reach agreement, it is very important that you continue to pay what you can afford.

If your case eventually reaches the courts, evidence that you have not walked away from your debt will work in your favour.

If the credit union refuses your offer, it may well start sending you solicitors’ letters demanding payment. Do not ignore these. Respond to all correspondence from lawyers, outlining what you can, and cannot, repay at the moment and reiterating any repayment proposal made. Do not overcommit.

There’s no point caving in to an intimidating legal letter and agreeing to repayments you know are unsustainable.

If no agreement can be reached, you may ultimately get a summons to appear in court, where your credit union may seek what is called an instalment order – where the court determines that you must pay a certain amount back each week or month.

The most important thing, if you get such a summons, is that you attend court. Do not ignore it. It will not go away. If you don’t attend, an order will be made in your absence and your failure to appear gives the judge no chance to assess your position.

You will be asked to fill out a statement of means. This is an official document which you have to file with the district court (for which your statement of affairs will be a useful reference point). It is on the basis of this statement – and your evidence in court – that the judge will decide how much you should pay.

It is unlikely that you can afford a solicitor and, I understand, legal aid is not available in these cases. You can get some basic legal advice from the Free Legal Advice Centre ( flac.ie) but there is no reason you cannot present your own case.

In the court, when your case is called, you and the credit union solicitor make yourselves known to the judge. The credit union side will present its case and you will then have the chance to outline your position.

The experience of those who have been through the system is that judges are not unreasonable in these cases, especially where the debtor is on welfare, turns up and is being seen to make payments as best they can.

Finally, you state this is not your only debt. I would suggest that you adopt the above procedure with all creditors.

And, notwithstanding, your experience to date, I would re-engage with Mabs; it is the organisation with the greatest experience dealing with cases like yours – where there are debts outstanding to more than one institution or creditor.

While there have been good relations between Mabs and credit unions, it is disconcerting to hear that you have had such a negative experience with the service – especially as the agency is expected to play a pivotal role in the new personal insolvency regime details of which were published earlier this year. Hopefully a different adviser will prove more helpful.

This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.