How to: Deal with bank debt arrears

The time when you could ignore your debt problem is over. Banks are now pushing for ‘sustainable’ debt settlements, in line with Central Bank guidelines. This can mean anything from extended repayment periods to asset sales. There may even be pressure on you to sell your home.

Keep talking: Never ignore letters or phone calls from your bank. You should engage with the bank. This will avoid a move to summary judgement because of a lack of co-operation on your behalf.

Assess your situation: You will need to be open with the bank and declare all debts you may have, not just borrowings they have lent you. Ask for a hold on any collection procedures until you complete your personal review.

Be realistic. Promise what you can afford to repay: Calculate what your personal living needs are and then allocate what you can afford to loan repayments and no more.

Get real: Now is not the time to be over optimistic. A ‘blue sky thinking’ deal seems great, but can leave you unable to pay your other bills or force you into default on loan repayments. You could end up back where you started but without the bank’s goodwill.

Get Advice: For small debts go to the free money advice organisation MABS (www.mabs.ie). For larger debt ask a financial expert.

Know what banks expect from you: Your lender is seeking openness and common sense from you in your dealings with them. They expect you to be able to make repayments on interest and capital. Interest only deals are not going to be a runner.

Know what banks can and can’t do: Your lender is looking for a sustainable repayment framework. This will mean a combination of:

1) A sustainable loan with a commercial interest rate.

2) A portion of the loan deferred at a 0% interest rate, which you will be liable to repay in full at a future date (for example on the sale of the property when prices improve)

3) A portion of the loan that is non-repayable but will not be formally written off until portions A and B are fully repaid.

Don’t wait, get up to date now.