Overview of problem debt
Any form of credit is a debt, so most people have some debts. It is only when you are unable to keep up with the payments that your debt becomes a problem. If you are in this situation, for whatever reason, you may find yourself having some of the following difficulties:
- Missed payments and letters from creditors
- Borrowing money to pay bills and catch up with arrears
- Paying whichever creditor is putting on most pressure
- Making promises to pay unreasonable amounts
- Broken promises and more pressure from creditors
- Legal action
It is vital to take action to deal with your debts and stop the situation from getting any worse. For example, if you don’t start getting your debts under control, your creditors could go to court and eventually repossess your home. This can happen even if you have no mortgage on your home or your mortgage payments are up to date.
Getting help from MABS
The Money Advice and Budgeting Service (MABS) is a free and confidential service for people with debt problems and money management problems. MABS can help you to explore your options and deal with your debt in a systematic way. Its website mabs.ie has several useful resources, including a self-help guide – see ‘What you can do yourself’ below.
Dealing with creditors: MABS has agreed a protocol (pdf) with the Banking and Payments Federation of Ireland (BPFI) to help people to manage their debt repayments in a way that they can afford. The lenders that have signed up to the protocol have committed to work with MABS money advisers to help customers to address their debt problems and agree a sustainable plan of repayments. The protocol allows for write-off of some debt, at the lender’s discretion. It does not apply to mortgage debt.
You can read more about this protocol in these FAQs (pdf).
Separately from this protocol, MABS can also help you to agree a sustainable repayment plan with your other creditors.
Accessing personal insolvency options: All MABS services are registered as Approved Intermediaries with the Insolvency Service of Ireland (ISI) and can bring you through the process of getting a Debt Relief Notice if this is an appropriate solution for you. MABS can also advise you on how to access the other personal insolvency options – see below.
Dealing with mortgage arrears: MABS has a Dedicated Mortgage Arrears service in over 20 locations. It also operates a court mentor service, in collaboration with the Insolvency Service of Ireland (ISI), to assist debtors faced with court proceedings. Read more about these services.
MABS is also centrally involved in a new aid and advice scheme for people in serious mortgage arrears, as part of Abhaile, the national Mortgage Arrears Resolution Service. This service was launched in October 2016.
Contacting MABS: The MABS Helpline 0761 07 2000 is open from 9am to 8pm, Monday to Friday. You can also email firstname.lastname@example.org or you can make an appointment to meet a money adviser in person in one of the nationwide network of MABS offices.
Personal insolvency options
Three personal insolvency options have been introduced for people who cannot afford to pay their personal and mortgage debts. The system of bankruptcy has also been updated. The Insolvency Service of Ireland (ISI) administers all of these debt resolution processes. It publishes extensive information on its website, isi.gov.ie.
The ISI also has a debtor-focused website backontrack.ie, giving examples of how individuals have managed to resolve their problem debt, along with step-by-step guides on dealing with debt. You can use the website to request a callback, or you can contact the ISI’s helpline 0761 06 4200, which is open from 9am to 6pm, Monday to Friday.
What you can do yourself
If you are in mortgage arrears, or feel you are likely to be in mortgage arrears soon, the most important step you can take is to contact your lender immediately. You can find out more in our overview of mortgage debt.
For other debts, it is also very important to let your creditors know that you are having difficulties. Then you will be able to work with them to deal with the situation. Otherwise the problems and the pressure from creditors will just get worse.
Even if you have already sought help, you can use the MABS self-help tool to help you through the following steps:
1. Assess your situation. Make a list of all your debts. Check that each debt is in your name. Identify the debts needing immediate attention (for example, your mortgage arrears). Get in touch with the lenders immediately - preferably in writing. There is a sample letter on the MABS website.
2. Make out a budget. List how much money is coming into your household each week (or month) and how much is going out. You can get useful documents like a blank budget sheet and spending diary (pdf) from the MABS website or request them through the MABS helpline.
MABS also has a dedicated budgeting tool.
3. Deal with the debt. Write to the lender, making an offer of the amount you can afford to pay and explaining your financial situation. The MABS website has a sample letter of offer and blank financial statements.
4. Organise a method of paying the agreed amount. You can do this in various ways, such as direct debit, internet banking or a MABS Budget Account.
Terminology and procedures
There are different forms of debt, including mortgages, loans, overdrafts, credit cards and hire purchase agreements. Some debts, for example, mortgages, are secured – this means that goods or property, usually your house, is used as security in case the debt is not paid. Find out more about types of debt and debt terminology in our glossary of debt terms.
Some debts have specific rules and practices in place in relation to how they are managed and collected. These are mainly debts which are owed to the State or a State body. In particular, taxes, social welfare overpayments, local authority rents and housing loans, utility bills and TV licences all have specific rules and procedures. Find out more about the rules for specific debts.
There are general rules under consumer credit legislation in relation to collecting debts, including rules in relation to privacy, contact points and harassment and intimidation. There is a particular code of conduct for how lenders must engage with people in mortgage arrears or pre-arrears.
If you do not engage with your lender, your lender will most likely initiate legal proceedings to recover the debt. The case can be taken in the District Court, Circuit Court or High Court, depending on the amount of money involved. Once your lender has a Court judgment setting out the debt, this judgment can be enforced in various ways, including, in extreme cases, through bankruptcy proceedings. Being in arrears on debt repayments can also have other consequences, for example, it can affect your credit record and make it difficult to get credit in the future.
When someone has died, there are detailed rules about how their debts must be dealt with.
You can read more about current and proposed developments on personal debt and mortgage arrears in our document on responses to mortgage arrears and personal debt.