Patrick Bryan, a debt adviser friend of mine from Northern Ireland, and I were chatting recently about the universal nature of debt problems in the world. It became apparent that while we are all told that we live in an interconnected global economy it seems that the consumers of each country continue to suffer in silence when it comes to debt problems.
I asked Patrick to share a recent case with us so that you can see what life is like many time zones away in Northern Ireland.
It has been a bit of a depressing week in my efforts to give debt advice to people here in the province.
On Monday I spoke with David (name changed) from Belfast who has recently been in court as his second mortgage lender was trying to repossess his house for non-payment. He also had a fairly hefty balance on his credit cards and isn’t paying them either. His house is on the market, he has reduced the price once already and is unwilling to reduce it again, although there has been no viewers since it went up for sale. The property market is extremely stagnant in N.Ireland and a house has to represent a significant ‘bargain’ to attract a buyer.
“I have been made redundant twice” said David “and both times it took me a while to find work again, which meant that we had to borrow to keep up with our living expenses. We have two sons in college and that is expensive, plus we have all the usual things like a mortgage, car payments and all the other bills a regular family have.”
The family took out a second mortgage a couple of years ago to consolidate the debts accrued from David’s first period of redundancy, and ironically it this lender which has been the least accommodating about their financial situation and recently took them to court.
David was clearly at the end of his tether during our conversation this week, “I just can’t see a way through this, I realise we willingly borrowed the money and feel morally bound to pay it back but we just can’t go on robbing Peter to pay Paul. We are getting demands for payment from all sides at present and I just don’t know which way to turn – every time I plug a hole in on part of the dam another bigger leak springs out somewhere else.”
Unfortunately for David I was unable to help him with his debts because his monthly expenditure considerably exceeds his income, and that is before he makes any payments to his unsecured creditors. He is (just about) maintaining an arrangement to repay his mortgage and reduce his arrears balance but as a consequence his credit card borrowings are increasing substantially each month, and he is failing to make his minimum payments on these.
My advice was that he should reduce the price on his house further and get it sold as soon as possible. It is my belief that his unsecured creditors will very soon default his credit cards, cutting off his ability to top up his income each month. Once that happens he will then start to miss his repayment schedule on his mortgage arrears and other priority debts, he will end up back in court and a possession order will be granted, and he and his family will be out on the street.
I felt really bad having to give this advice but unfortunately sometimes the people I speak to are too far down the debt path to save their homes from being sold. In this case it is better for the property to be sold under David’s control rather than being repossessed by the lender and sold at auction.
For David if he can get his house sold now and clear his debts with his equity then he can still afford to rent a home, and a huge millstone will be taken from around his neck. It might not seem like it at present, but hanging on to his house and getting himself into serious debt as a consequence is not working for David and is putting himself and his family under massive stress, more stress than they would experience from selling at a reduced price and moving into rented accommodation.
I wish you well David and my thoughts are with you and your family as you go through this difficult time.
If you’d like to learn more about debt problems in Northern Ireland, visit Patrick’s site.