Mortgage relief at last for up to 30,000 struggling homeowners
UP TO 30,000 homeowners unable to pay their mortgages face the prospect of having large chunks of their debt wiped out -- in a move that could save thousands of families from losing their homes.
Borrowers drowning in debt have been thrown a major life line -- after the Government unveiled radical new measures which will allow us to strike individual deals with creditors.
The measures will effectively provide breathing space for those being chased by ruthless creditors and unsympathetic banks.
The Government has created three options for those struggling to cope with debt.
The measures range from helping those who are left with less than €60 in disposable income each month, to providing a personal trustee who will help save distressed mortgage holders from losing their homes.
Debt built up on our credit cards and through high-purchase agreements and car loans may now be radically restructured and even partially wiped out as a result of the legislation.
The measures will also see the bankruptcy period cut from 12 years to just three.
Mortgage experts today hailed the measures as "badly needed" and have estimated that more than 25,000 homeowners could benefit.
However, widespread uncertainty rages over whether banks will play ball with distressed mortgage holders.
The banks have yet to deliver their responses to the bill -- which will effectively ask lenders to forgive large portions of mortgage debt.
There are also concerns about how much scrutiny will be placed on peoples' personal finances -- with the possibility that once-off incomes such as inheritances and lotto wins will affect agreements.
The voluntary system brings in three strands of debt relief.
Option One will allow those who owe up to €20,000 in unsecured loans to apply for a debt-relief certificate.
People who fall into this category include those who are left with very little each month as their incomes are absorbed by huge credit card bills amassed over several months.
If granted, these borrowers will see their debts frozen for 12 months and potentially written off in full if they have been unable to improve their financial situation.
Option Two intends to assist those who have amassed unsecured debt of more than €20,000.
This will allow distressed borrowers to enter into a five-year deal where their creditor will be compelled to provide friendlier terms so that an "amount" of the debt can be paid off.
For the first time in the history of the State, an independent personal insolvency trustee will be appointed to assist people in negotiating with their creditors.
And finally Option Three -- called a Personal Insolvency Agreement -- is being hailed as the much-welcomed lifeline for distressed mortgage holders.
Those drowning in huge mortgage arrears will have their entire financial situation examined by their trustee -- who will then submit applications to the lender.
It is envisaged that a new repayment plan will be agreed -- which could be based on a condition that a portion of unsecured debts, even as high as €100,000, is completely wiped off.
Justice Minister Alan Shatter has argued that it is in banks' interests to play ball, otherwise they will be left with houses that they cannot sell in the current climate.
Mortgage expert Karl Deeter said that the measures are finally bridging the imbalance between distressed borrowers and lenders.
"In effect what it does is balance the tables between creditors and debtors.
"Up to now, when you went into negotiations with a mortgage holder you effectively had very few rights.
"What we're doing now is we're dealing with the issue through a more pragmatic and prescriptive manner."