What we are not saying is that people should try this, this post is merely pointing out that this kind of thing could happen and that a failure of enacting sensible policy soon enough could encourage people to look for solutions such as what we describe here as a means to solving their personal debt issues.
We don’t endorse handing back the keys, we are not suggesting that people do it or consider it, but merely looking at the pro’s and cons of doing so and demonstrating a method whereby a person could potentially try to fool the system while doing so.
The Cons are basically that you lose your home, and assuming that in this case the person is in €100,000 of negative equity then they are also hit with a judgement for the shortfall plus expenses, for the following twelve years that debt can come back to haunt you. Your actual credit may be restored in year seven but that doesn’t mean you are off the hook.
Consider the position of Joe Bloggs, he is deeply in debt, he has lost his job, his girlfriend who lives with him is still working and paying the mortgage, but things are not working out financially so Joe decides to hand back the keys to the bank, the €1,500 mortgage is now replaced by a property they rent for almost half that price. The €100,000 of negative equity that Joe was in would have cost almost €200,000 to pay off over the life of the loan, that is now a thing of the past.
Joe now decides to change his name by deed poll, he becomes Timmy Topper, Timmy has the same date of birth as Joe, but the ICB (Irish Credit Bureau) doesn’t track name changes. Timmy doesn’t like getting calls from collections agencies, the land-line ceased with the tenancy of the house, and he changes his mobile phone, getting a ready to go, now the letters are going to an old address to a person who doesn’t live there and nobody at the bank knows how to reach him.
Timmy then gets all of his papers in order, obtains a library card, an electricity bill and goes to a branch of Ulsterbank and opens an account, at this point it is necessary to lie, and say that he was abroad and didn’t have an account here before, or that he never used a bank account and his past job paid cash or he used a credit union, or he opens a savings account and later converts over to a current account. In any case, he is now back into the financial system minus any firm link to his defaulter past.
His girlfriend has remained squeeky clean all this time, he now gets added to her credit card, car insurance and they then open a joint account. Now Timmy is fully within the financial system and showing up as an upstanding citizen. The judgement is still in the sytem, and it is still tied to Joe Bloggs but Timmy has essentially an entirely new identity as far as all of the financial databases are concerned, there is nothing to connect him with his former self.
In fact, his PPNS number is the only thing, but ICB and other searches are not dependent on this, only revenue could patch it all together and their concern isn’t about whether he didn’t pay a bank back money he owed them, they are worried about tax liabilities only and they won’t actively work with any other companies.
Timmy has a new life, he can perhaps get a mortgage, and in a short amount of time reinvent himself and almost nobody will know the difference, and the people who know him may not even know that he did this because he doesn’t go around forcing them to refer to him as ‘Joe’, and in any case, he could make his new name ‘Timmy Joe Topper’ in which case it is easily explained away by saying ‘people call me by my middle name’.
This might seem like a lot of effort to go to for a person just to gain €700 a month in cash flow and avoid paying out €200,000 from future cash flow, but for a person who earns the average industrial wage there is definitely an incentive structure there.
There are flaws to this plan, and there are downsides, but it won’t stop a certain percentage from perhaps doing something like this, it won’t stop many from walking away from debts they believe they have no chance of paying in the future, and sadly, the argument against doing so is relatively weak versus what can be gained by the individual in this process. Renting is generally cheaper than buying in every market except for a constantly rising one. So even if a person doesn’t change their name and reinvent themselves, they could just rent and then in 12 years when it all dies down have considerable cash savings that they use to buy a property.
In the initial years putting your savings into a pension means that no creditor can get at it, and in the latter years spreading it across several institutions, in particular using foreign deposit takers could keep your savings off the radar of the bank you owe the debt to. Alongside of this there is the high probability that our debt laws will be changed and that the 12 year rule will cease to apply. For some people doing this would actually be the most rational decision if self preservation was their ultimate ideal, but perhaps Maslow’s hierarchy changes when it comes to debt?
I think its irresponsible to write an article like this basically telling people how to get out from under their debts. For people who wish to continue paying they will be forced to pick up the shortfall of others who do this kind of thing.
JG
I believe that the state should write off, even a portion of some peoples debts who are in negative equity and feel trepped. If you did that, these people could re-invest again, and the state in effect would be repaid.
People will say “Well who will pay for it?” My answer to that is, it costs around 200,000 Euro per annum to house one inmate in mountjoy prison for a year, will that person who has been in prison ever repay the state, no, they will just be a drain on the taxpayer for ever. Writing off debts will help society aswell.
@John Galt: I am not endorsing this, I am merely pointing out that a lack of solution may start to direct people toward this type of answer. Bank fees/prices are already going up and nobody is doing this now, so I don’t think it automatically follows, correlation and causation can be two different things.
This is a very informative article and it is anything but irresponsible of you to write it. All of this is the governments fault. People bought properties because that’s what people do when they want to settle down and start a family, they did not do it out of greed as is sometimes suggested by those not in debt. People who are in negative equity on their family home should be given some kind of a break by the government. They should write off the negative equity. One question?? Would there be legal implications for Tommy Topper (Joe Bloggs) if he was ever found out??
Very good informative article.
“I think its irresponsible to write an article like this…..” John you must be a shareholder.
Ok, i see a few flaws, but it could work. i have personal experience regarding handing back the keys, but i went about it slightly different.
1. meet the bank and explain in no uncertain terms that you can not see any point in furnishing a loan, where the negative equity is now in the region of €150,000.00, and that this is the fault of a banking system which originally lent you the money. this is negligence on their behalf.
2. Move all your stuff out, or in to storage, U Store do very good deals at the moment.
3. rent a new place to live. when you have a new rented home, then its time to send back the keys via registered post to the bank manager. its easy to get the managers name, by calling the local branch and asking them for the manager on duty.
4. Now its a matter of waiting. they might try to track you down, but if you have masked your tracks like i did, they wont know where to start. it does mean you are black listed, but you are free from that debt, and after 12 years, you can get another loan, by that time the markets will be well back on track….
well i see no problem with people handing the keys back… this is business, the house is the collateral, especially with 100% mortgages…. The world does not rotate around CREDIT/LOANS…
Since this article was written, the new bankruptcy period is 3 years and the new personal insolvency laws have been passed, but I’d just thought I’d forewarn anybody he tries the deed poll route that this is doomed to fail from the outset. Why??
Paragraph 3 in the article states “…they are also hit with a judgement for the shortfall….”. And most likely would be.
To change your name by deed poll you must apply to the Judgments Section of the courts where they keep a record of your old and new names. Game Over!!
http://www.courts.ie/offices.nsf/0/B43B2E45023B633B802573D10045B030?OpenDocument
The legal version of this will be to follow the UK bankruptcy route for those who can.
Hand back the keys.
6 months in the UK to establish COMI (Center Of Main Interest).
Make sure you have no income above the allowable expenses so no ongoing order for payment.
Return to Ireland after meeting with official receiver, say 7 months.
If the bankruptcy is simple, ask the Official Receiver for Discharge After 6 months
Clean legal and without debt in 13 months. A chance to get back into society and be productive, pay taxes and raise kids.
No BS from the banks, accountants, PIPs and all the other trough feeders who live off the house buying ponzi scheme.
Tell me why anybody should get into the Irish Serfdom Insolvency system if they can avail of this option. The only reason I’ve heard is the begruders line that I’ll have to pay for it. They pay for revenue write-offs (PAYE and VAT) in company liquidations every month and there’s not a beep about it.
We need to stop making people into serfs and get them back into society.
Alas as usual it will be another ISIP ( Irish Solution to any Irish Problem). Were great at letting the Brits clean up our messes.
The sad part will be people who cannot move to the UK and will be at the mercy of the new insolvency serfdom.