Writing off an unsecured loan/debt?

Hi all,

This story isn't my own (for the first time in 7 years I'm finally debt-free! ) but it is a friend's problem. However, to keep things simple and easy to read, I'm gonna write in in first-person perspective


So with that said...


I got a loan a couple of years ago from AIB for €24,000, to be paid back over a ten year period. The loan was a personal loan, but was for a business that I was starting out with at the time.

The loan was useful and was grand to get, but unfortunately the business collapsed with the downturn in the economy and has since been closed/finished entirely.

I currently owe €16,000 on the loan and have never missed a payment on it. When my own business closed, I got lucky and landed a job almost immediately.

I'm now unemployed and have other bills to pay (mortgage, weekly bills, etc.) and can no longer afford the AIB debt. I called to the bank for a meeting that they had set up recently and they said they could offer me an interest-only repayment scheme, and then get back to me in six months to see if my circumstances have improved.

Truth be told, I can't even afford to pay just the interest-only payments, anyway.


So I'm in a bit of a difficult situation now, and I'm wondering what the alternatives here are? Someone was talking to me recently and said that in this case I could get the loan 'written off'. I don't overly enjoy the thoughts of this (I got the loan, so I do feel a responsibility to pay it back) however as I'm genuinely unable to pay it, I'm interested in exploring that option.

As far as I know, if I write of a loan, the bank look at it as a 'bad debt' and cancel it altogether, but the downside is that it affects my credit rating and any chance of getting a loan off any lending institution (credit union, other banks, etc.) is nil.

Are there any other downsides to doing this does anyone know?

When talking to the bank, I offered a solution which would be to freeze the loan in it's entirety (ie; stop paying back) until I get a job, when I could then resume payments, but they didn't really take to that idea (but said they'd ring me back about it). To be honest, they seem a little inflexible (which is understandable as they have to protect themselves, but blood from a stone, and all that)


Would anyone have any idea on what way to best approach this?



(again, not my own personal story, but you can imagine how difficult it'd have been with "he said" and "they said" all the way through).


Cheers to anyone able to offer any advice.

I'm continuing to Google about and search boards but not really finding too much


Thanks

wmpdd3

How many years are left to pay, banks seem to want everything sorted in 5 years, would you be able to afford ~ €300 a month, this would be the balance over 5 years and about 5% interest.

I doubt this is possible as this could be higher than interest only.

If not you need to get yourself down to MABs, they will go through all you income and outgoings and draft an offer letter for the bank for you.

Could you get some money together for a settlement?

As far as I know the person will have about (give or take) €8 in his pocket at the end of each week, after mortgage, bills and food etc. are sorted (all the essentials).

This is under the assumption that he is entitled to the full €188 rate of jobseeker's (which he should be). I'll mention MABS to him (I was on their site earlier on, actually) but he's a relatively intelligent chap and would have done an income/outgoings spreadsheet out, I'd say. He's cut back on things he can (shopping, etc.) but losing job will hit him hard.

As far as I know, he has agreed to 10 years repayment term for the loan, and he's either got 4.5 years left or 5.5 years left (I'm not entirely sure which it is, but it's definitely one of the two).

To get money for a settlement would require getting a loan to get any amount of money required.

johnwest288

In terms of making repayments, if he fails to make repayments the institution which gave him the loan could seek to get a court order against him.
This would mean that his credit rating is immediately affected - he will not be able to access credit from other lenders as well. Which in any event is the last thing on his mind anyway getting more credit!
What exactly happens when a bank gets a "Court order" against someone not paying anyway does anyone know????

chris85

Deleted User wrote: »

Hi all,

This story isn't my own (for the first time in 7 years I'm finally debt-free! ) but it is a friend's problem. However, to keep things simple and easy to read, I'm gonna write in in first-person perspective


So with that said...


I got a loan a couple of years ago from AIB for €24,000, to be paid back over a ten year period. The loan was a personal loan, but was for a business that I was starting out with at the time.

The loan was useful and was grand to get, but unfortunately the business collapsed with the downturn in the economy and has since been closed/finished entirely.

I currently owe €16,000 on the loan and have never missed a payment on it. When my own business closed, I got lucky and landed a job almost immediately.

I'm now unemployed and have other bills to pay (mortgage, weekly bills, etc.) and can no longer afford the AIB debt. I called to the bank for a meeting that they had set up recently and they said they could offer me an interest-only repayment scheme, and then get back to me in six months to see if my circumstances have improved.

Truth be told, I can't even afford to pay just the interest-only payments, anyway.


So I'm in a bit of a difficult situation now, and I'm wondering what the alternatives here are? Someone was talking to me recently and said that in this case I could get the loan 'written off'. I don't overly enjoy the thoughts of this (I got the loan, so I do feel a responsibility to pay it back) however as I'm genuinely unable to pay it, I'm interested in exploring that option.

As far as I know, if I write of a loan, the bank look at it as a 'bad debt' and cancel it altogether, but the downside is that it affects my credit rating and any chance of getting a loan off any lending institution (credit union, other banks, etc.) is nil.

Are there any other downsides to doing this does anyone know?

When talking to the bank, I offered a solution which would be to freeze the loan in it's entirety (ie; stop paying back) until I get a job, when I could then resume payments, but they didn't really take to that idea (but said they'd ring me back about it). To be honest, they seem a little inflexible (which is understandable as they have to protect themselves, but blood from a stone, and all that)


Would anyone have any idea on what way to best approach this?



(again, not my own personal story, but you can imagine how difficult it'd have been with "he said" and "they said" all the way through).


Cheers to anyone able to offer any advice.

I'm continuing to Google about and search boards but not really finding too much


Thanks

The bad side of this is the bank will realistically not agree to a write off of the debt. If no agreement made to pay it back then generally pursue through the courts. With you being unemployed an order for repayment may not be granted but it would be better for the bank as the judgment secured in court would secure the debt for a longer period of time.

johnwest288

chris85 wrote: »

The bad side of this is the bank will realistically not agree to a write off of the debt. If no agreement made to pay it back then generally pursue through the courts. With you being unemployed an order for repayment may not be granted but it would be better for the bank as the judgment secured in court would secure the debt for a longer period of time.

But if its an unsecured Debt... What exactly can a court order from a judge do?
Is a court order an order to Pay the money? Or does it mean you have had a judgement made against you so no credit and a blot on your credit rating for 5 years

chris85

johnwest288 wrote: »

But if its an unsecured Debt... What exactly can a court order from a judge do?
Is a court order an order to Pay the money? Or does it mean you have had a judgement made against you so no credit and a blot on your credit rating for 5 years

A judgment is got first by the bank and this means little more than the courts ruling the person owes the money to the bank. This is a formaility for the banks to obtain and generally no hearing in court required. An important part of this is that it renders the debt legally owing and the bank can pursue further within the court for a period of up to 12 years. So they can get a judgment and come back 12 years later and start seeking the money to be paid.

A court order can then be sought to repay the money following the judgment. THis is more complex and the courts would look at the debtor and their circumstances and see how much they can pay. This can be difficult to obtain but if the debtor has means to pay it back an order to pay it back will be granted. The bank may decide to wait till the person is back to work before pursuing this.

Other options are also available following judgment.

http://ec.europa.eu/civiljustice/enforce_judgement/enforce_judgement_ire_en.htm