RTE Six One News: Insolvency Service piece by Conor Hunt, 3rd April 2014

We gave a few thoughts on the recent ISI figures.

That the case numbers are low is to be expected, firstly, informal negotiations have had a six year head start, you can’t expect the ISI to be caught up already, secondly, in the UK it took about a decade for the system in general to find its feet.

Lastly, many people don’t want to use personal insolvency as it is rigid and informal deals are not to the same extent, banks offer better terms outside of insolvency, and perhaps the greatest success is that banks are doing these deals only since the ISI launched.

Prior to that they wouldn’t so the fear of people using these solutions has spurred the lenders into action.

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‘Fix or forever hold your tongue!’, A floor on Rates (with a rise likely!)

Rates likely to rise as per AIB’s statement, and PTsbs actions, what we are trying to tell everybody, in clear English is this: ‘If you don’t have a price guarantee on your mortgage via a tracker or fixed rate agreement then you will be paying greater margin over ECB in the near future than you are now’. If you don’t act upon that information then it is your own decision but you can’t say you weren’t forewarned.

Forewarning doesn’t stop disaster, the historical evidence on that is overwhelming, in particular in the military arena, today however, we will look at some of the potential changes we might see in the market.

Floor Rate: This would be a variable agreement whereby the rate will never dip below a certain level. For instance, a bank might say that in a low rate environment it will (in the future) never allow its variable rate to drop below 4%, …

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Debt Management: no tax break for people in trouble

Financial services (such as brokering) are a zero VAT business, we cannot charge VAT for our activities, we do however, pay VAT on all of our supplies and in one respect that makes financial services good for the Revenue Commissioners, it’s a one way street.

Equally, it makes everything more expensive for a financial services company, but we won’t be expecting any sympathy on that!

However, what happens when that financial service is for a person in difficulty? A guideline given by the Revenue Commissioners to a debt management company in Dublin has lead to the interpretation that ‘Debt Management’ is subject to VAT.

What that means is this:- If you get into trouble servicing your debt and you hire a professional service to help you negotiate with lenders and to arrive at settlements on interest and principle amounts due then you will have to pay VAT on the fee applicable by the company that is helping you to get out of trouble. Thus the service becomes 21.5% more …

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