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Finding the Right Fit - What Is The Solution to Your Own Debt Problem - By Gerry Owens, APIP Member (PIP)

Date added: 26 Jan 2016

The usual question asked by people seeking a debt solution is “Am I debt-free after bankruptcy?”  I am sure there are some advisers who might say “Yes” - after a short mental review of the basic rules!  I would like to offer an alternative question for debtors to ask themselves and their advisors/personal insolvency practitioners (PIPs); “Should I want to be debt-free after bankruptcy?”  Depending on your circumstances, you may wish to remain in debt, but in debt that you can afford.  There is not a one-for-all answer as everyone’s situation is different and they should seek to find the debt solution that is right for them.

What are the constituents of debt?  You have received credit from a lender or creditor on the basis that you are prepared to commit future earnings to repay that debt. The level of repayments will obviously depend on the term of the lending agreement and the rate of interest charged.

There are many types of debt contracts, but when you boil them down, they all have the same basic constituents.

Unfortunately if the monthly income stream you were counting on to pay the monthly repayments is cut off or stops altogether, now you have a problem. Obviously, you will fail to honour the terms of the lending contract and the lender/creditor will take action to recover the loan. Let us be honest, very few people will rush to their creditors with that sort of news, who wants to hear, “sorry about this but, I just lost my job and I will not be able to make my repayment next week."

Most debtors will be upset when they hear their job is gone, and the very resilient will dust themselves down and get to work on finding a new job.  Sadly for a large number of people the extent of job losses caused by the financial crash experienced from late 2006, job hunting became a very difficult task. The initial upset led to embarrassment and slowly they declined invitations to socialise. To add to the loss of income, they became socially isolated and distressed.  Signing on became a new habit and life goes on, at least you have a roof over your head, but the letters, every time you see post delivered, you are fearful it’s another demand letter which you can’t pay.

Then you see an advertisement……’Debt-Free – Just Call Me!'

This brings us back to the questions posed, do you want to be debt-free?

Debt-free means you lose almost everything and for some people the stress can be too much.  If your circumstances are such that you simply can’t sustain a repayment plan that would support a Personal Insolvency Alternative Repayment Plan, be it a DSA or PIA, then bankruptcy may be the answer, but it need not be with the purpose of being ‘Debt-Free’.

Bankruptcy with debts reduced to one debt, your PPR mortgage debt, restructured if needs be, this should be the result you want as long as you can be confident that you can meet the restructured repayments. Yes you are still in debt, but so is almost everyone else; the difference is the debt is manageable. This is the foundation upon which many of you may choose - with the help of your advisor/PIP - to rebuild your life and take control of your own destiny.

It is easy to make an application which demonstrates to everyone that bankruptcy is your only option and as part of that deal you surrender up your home to be debt free, but the long term personal cost may far out weight the money cost of keeping a home for you and your family.  

Contact Gerry Owens, Cork APIP member (PIP), Principal at Negotiators

With over 38 years of experience in banking, property and mortgages, Gerry Owens is well positioned to help guide you through your financial situation.  Gerry is a regulated personal insolvency practitioner (PIP).  If you have any questions regarding the above advice or letters, please call Gerry Owens at 021 489 3303 or 086 833 33 33 or visit: www.negotiators.ie.

For further information visit Gerry Owens' APIP profile here.