Insolvency: creditors pay for it and carry cost & why some people can’t do it

Something that we hear a lot is that Personal Insolvency Practitioners are expensive, while they may be costly, it is worth looking at where the cost base rests. While one party may have the appearance of ‘paying’ for something, in fact it’s forgone income to the creditors, we demonstrate this using simple T-accounts to show how it works.

Another critique is that ‘not everybody will be able to afford it or obtain an insolvency arrangement’, again, this is in part structural and not necessarily some kind of financial bigotry. To strike an insolvency deal, the same as a company being granted examinership, you have to have some ‘post plan’ survival plan, if you are below poverty levels already taking one out would be to your detriment.

Rather it is the case that for people who are too financially underwater to create a plan will have two choices, non-ISI agreements with the bank, or bankruptcy. The same applies for a company, examinership is not always granted where there is no workable plan for after the protective period.

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Mortgage writedowns occurring, but how much?

We often hear that banks are writing down mortgage debts, but then the lenders themselves say ‘this isn’t happening’. For such a large rumour there is a surprising lack of evidence on either side of the argument, although we do see scant documentation indicating this in some cases.

If you click on the picture it will give you the larger version of the kind of documents we see from time to time. In this instance the client has said they owe over €200,000 but that they lender will take less than half of this, settling on a figure of c. €90,000 to clear in full or they’ll owe the difference if it goes for less.

The property seems to be at a significant discount to others in the same area, and unless the person in question is not being honest (we have no reason to think they aren’t) then the letter indicates over …

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