Key Post What can I do about debt I can’t afford to repay – I don’t own a house.

Brendan Burgess

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I have no direct experience of this, so corrections are welcome. It is meant to be a simple introduction and is not designed to cover all exceptions etc.


The Debt Relief Notice is designed for you if…

You owe less than €35,000

You are unable or struggling to meet the repayments on this debt

You don’t own your own home or any other property

You don’t have any other assets such as investments worth more than €1,500 (The main exception is that you can own a car worth up to €5,000)



For example

You have a Credit Union loan of €15,000 and €10,000 on your credit card.

You lost your job and are on social welfare.

You won’t be able to repay your debts over the next three years

The DRN is not suitable for you

If you own your own home – check out the Personal Insolvency Arrangement

You owe more than €35,000 – check out bankruptcy

If you can pay, pay... but if are on Social Welfare, you should not be going without to repay unpayable debts.

The DRN is not designed to help people who can afford to pay their debts to avoid doing so.

It is designed for people whose circumstances have change and/or who have got themselves into a hole, they can't otherwise get out of. Don't compromise your ability to pay for food, electricity and rent, so that you can pay your credit card or the Credit Union.

How it works

Go to MABS who will check if you are eligible. You can call them on 081807 2000

They will sign a statement saying you are eligible and will send your application to the Insolvency Service of Ireland

If The ISI is happy it will issue a certificate to that effect and send it on to the Circuit Court.

The Court will review the application and and will issue a Debt Relief Notice

How much will it cost me?
Nothing

What happens during the next three years?

You don't pay anything to your creditors.

Your creditors will not be allowed to take any action.

If your income increases, you must notify the Insolvency Service and pay something to your creditors.

If you get a lump sum e.g., an inheritance, you must notify the Insolvency Service and pay it towards your creditors.

What happens at the end of three years?

Your debt is written off and you have a fresh start.

Three years seems like a very long time?

Well the alternative is that you will continue to owe the money indefinitely.

But if I have to give 50% of any increase in my earnings to my creditors, there is no incentive to get a job

Well if you can repay your debts, you should do so anyway. So if you can get a job and repay your debts that is good for everyone.

What is the alternative to a DRN?

Your creditors will probably get very little under a DRN. So if you have a family member who can help out, you should offer your creditors say 20% of the amount you owe them in full and final settlement. They might agree so it’s worth asking them.

But you will have to get the agreement of all your creditors. Don’t pay 20% to your credit card only to find that you need a DRN anyway because the Credit Union refuses to do a deal.

But the DRN will damage my credit record and I won’t be able to borrow again

Well if you have big debts, then your credit record is ruined anyway.
 
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You can exit the process at any time by paying 50% of your debts

This is not used as much as it could be. If you come into money or you can get help to pay 50% of the original debt, the rest is written off and you get a fresh start.

 
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Are there reasons why I should not opt for a Debt Relief Notice?

1) If you can get your creditors to agree to settle your debts for a small payment, then you won't have to wait three years to have your debts written off.

2) You can only go for a DRN once. So if you have very small debts e.g. €5,000 which you might be able to repay under your own steam, you might want to hold onto the option of a DRN for the future.

3) Some people have particular loyalty to their Credit Union and want to repay the loan no matter what. Or they want to repay the Credit Union because they may be the only people who would give them a loan in the future.
 
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