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					Special edition
December 2010


Volume 37: Issue 12
ISSN 0790-4290




Relate
The journal of developments in social services, policy and legislation
in Ireland




Dealing with debt
Introduction

In this issue we look at what is likely to happen if you have difficulty making
repayments for various types of debt. The specific issues arising from mortgage debts
were outlined in the special edition of Relate, February 2010. The April 2010 issue of
Relate deals with problems in paying back local authority loans and in paying rent to
local authorities. Since April, some of the legislation mentioned in that article has
come into effect and this is described briefly here. The Expert Group on Mortgage
Arrears and Personal Debt has issued its final report and the main recommendations
of the report are described.

This issue of Relate is, however, largely concerned with non-housing-related debts.
You may owe money because you are unable to pay back money you borrowed under
a consumer credit agreement, you are unable to pay a utility bill (such as electricity or
gas) or you have received goods or services from a supplier and you are unable to pay
for them. We are primarily concerned here with consumer debts but much of the
information also applies to business debts.



Terms used

Debtor
You are a debtor if you owe money to someone. If a court judgment is awarded
against you, you are the judgment debtor.
Creditor
The creditor is the person (or company) to whom you owe money. This person is
known as the judgment creditor if judgment is awarded against you in court.


Debt forbearance and forgiveness
Debt forbearance is the term that is sometimes used by creditors (and is used in the
reports of the Expert Group on Mortgage Arrears and Personal Debt) when they agree
to allow you to change the manner in which your debt will be repaid, for example, by
postponing some payments or by restructuring the manner in which repayments are
made. It is also sometimes called loan modification. You continue to owe the full
amount and you will eventually have to repay it all.

Debt forgiveness or cancellation occurs when your creditor decides not to pursue the
debt. Permanent debt forgiveness is rare. Some creditors may cease to pursue the debt
because they recognise that you will never be able to repay it but that does not mean
that the debt is forgiven or cancelled. If your circumstances change, you may still be
pursued for it.


Consumer credit agreements
The law on consumer credit is mainly concerned with ensuring that you, the consumer
or borrower, are given detailed information before entering into a consumer credit
agreement. It also provides for information about arrears of debt to be given to you. It
includes provisions governing debt collection methods.

The rules apply to almost all credit agreements, hire- purchase agreements and
consumer-hire agreements to which a consumer is a party. (They do not apply to
agreements entered into by businesses.) So, they apply to agreements to borrow
money that you make with banks, building societies, moneylenders and certain other
finance companies. They do not apply to agreements to borrow money from credit
unions, pawnbrokers and utility service providers.

Agreements covered by the consumer credit legislation must be in writing. If they are
not in writing, they are not enforceable. That means that the creditor would not
succeed in an action for judgment against you in respect of the debts. The legislation
provides that it is an offence for a creditor to demand payment if the agreement is not
enforceable.

The Central Bank’s Consumer Protection Code applies to most consumer credit
agreements. For moneylenders, the Consumer Protection Code for Licensed
Moneylenders applies. Website: centralbank.ie


Contracts
In this context, a contract is an agreement by one party to provide goods or services
for another in return for payment.
In general, contracts do not have to be in writing in order to be enforceable. However,
contracts for the sale of land and contracts governed by the Consumer Credit Act must
be in writing in order to be enforceable.

Failure to pay is a breach of the contract. Contracts may include penalty clauses for
failure to meet the terms of the contract. So, for example, the contract may provide
that you must pay an extra charge or you must pay interest if you fail to pay on time.


Simple contract debt
This is a debt that arises because you have failed to pay for goods or services that are
not covered by any special rules. For example, if you buy goods using a cheque and
the cheque is not honoured, there is a simple contract debt to the seller. If you avail of
the services of a plumber and do not pay for them, there is a simple contract debt to
the plumber. The seller or the plumber can go to court to get judgment against you
and then enforce that judgment.

A range of legislation provides that various fees and levies (for example, waste
charges) that have not been paid may be dealt with in court in the same way as simple
contract debts.


Secured loan
This is a loan on which property or goods are available as security against non-
payment. Mortgages are the most common secured loans.

In general, debts such as bank loans and credit card debt are not secured. However, if
you decide to roll up such loans into your mortgage, they then become secured loans.

If the property or goods on which the security is based are subsequently sold, the loan
must be paid off before the proceeds can be used for any other purposes.


Priority debts
This term can be used in a general sense but it can also have a specific legal meaning.
If you owe money to a number of creditors, you may have your own view of which of
these debts take priority. For example, many people would regard the repayments on
their home as taking priority over the repayment of other loans.

The legal meaning of priority debts may be different. For example, in receiverships,
liquidations and bankruptcy, the law sets out the order in which the debts must be
paid.



Debts and criminal offences
Most debts arise because you have failed to meet the terms of a contract. For example,
you borrow money from the bank or credit union and you fail to pay it back, or you
enter into an agreement to buy equipment by instalments and you fail to pay. It is a
breach of contract to fail to pay such debts; it is not generally a criminal offence.

It is a criminal offence to fail to pay certain debts. For example, it is an offence not to
pay your taxes, second home charge or TV licence fee. You may be charged and
convicted for failure to pay such debts.

Even if you are charged, convicted and fined, you still owe the debt and can be sued
for it in the normal way.


Debt advisors/management agencies
The Money Advice and Budgeting Service (MABS) is a non- commercial state
agency that does not charge fees. There are a number of private commercial debt
advisors/management agencies that help you to manage your debts for a fee. They are
not regulated. The Minister for Finance has said that it is intended to regulate debt
advisors. The Expert Group on Mortgage Arrears and Personal Debt recommends in
its final report that a licensing regime be put in place to ensure best practice and
conduct.



Debt collection
Your creditor is entitled to ask you to pay your debts but is not entitled to harass or
intimidate you. There are specific rules for debt collection in relation to agreements
covered by the consumer credit legislation.



Harassment and intimidation
All debt collectors, including private individuals and debt collection agencies, are
covered by section 11 of the Non- Fatal Offences Against the Person Act 1997. This
provides that a person is guilty of an offence if he/she makes any demand for payment
of a debt and if:

      The demands are so frequent as to be calculated to subject you or a member of
       your family to alarm, distress or humiliation, or
      The person falsely represents that you may be prosecuted for non-payment of
       the debt, or
      The person falsely represents that he or she is authorised in some official
       capacity to enforce payment, or
      The person produces a document which suggest it is an official document but
       is not

If you are subjected to such behaviour by your creditor or by a debt collection agency,
you should report the matter to the Gardaí.
Private debt collectors
Instead of directly pursuing you for debts, lenders sometimes sell the debt to a private
collection agency. There are a number of private debt collection agencies operating in
Ireland. They are not regulated.

The Expert Group on Mortgage Arrears and Personal Debt has recommended that “a
licensing system, containing a fit and proper person test and covering code of
behaviour requirements, be considered for those engaged in the collection of debt”.



Court procedures for judgment
If you fail to pay a debt, your creditor is likely to go to court in order to get a court
judgment that you owe the debt and to then enforce that judgment.



Time limits
There are time limits (limitation periods) for taking most types of court action. The
law in relation to time limits is complex but, in general, the time limit for taking
actions for breach of contract (for example, failure to pay for goods or services
provided), for debt judgments, and for non-payment of charges such as rent, is six
years. This means that if your creditor does not start the court action within six years
of the debt being due, the action is statute-barred. Effectively, that means that you
cannot be forced to pay the debt.

If your creditor gets a judgment, then, in general, he/she has 12 years in which to
enforce that judgment.

The general rules do not apply to taxes. There is a four- year time limit on the
Revenue Commissioners seeking tax from you and there is a four-year time limit on
you seeking repayment of taxes which you were not due to pay. However, if there is
any fraud or neglect, there is no time limit.



Initial notice of court action
If the matter is covered by the consumer credit legislation, then the creditor must issue
a notice to you at least 10 days before taking legal action. If the consumer credit
legislation does not apply, then it is the usual practice for creditors to send a seven-
day demand letter to you before starting legal proceedings.


Which court?
       If you owe less than €6,350, the court proceedings must be brought in the
        District Court; proceedings are started when the creditor issues you with a
        Civil Summons; the procedure is governed by the District Court Rules.
      If you owe between €6,350 and €38,091, the court proceedings must be
       brought in the Circuit Court; proceedings are started when the creditor serves
       you with an Ordinary Civil Bill; the procedure is governed by the Rules of the
       Circuit Court.
      If you owe more than €38,091, the court proceedings must be brought in the
       High Court; proceedings are started when you are served with a Summary
       Summons by the creditor; the procedure is governed by the Rules of the
       Superior Courts.

Website: courts.ie



Court procedures
The procedures and the documents that are used are different depending on which
court is involved and sometimes on which kind of debt is involved. The proceedings
are started by the person to whom you owe money. That person (or group of people or
company) is the creditor and the plaintiff in the case. You are the debtor and the
defendant in the case.


District Court procedure
In general, the legal proceedings must be started in the District Court area in which
you live or in which the contract was made. However, if the contract comes within
the Consumer Credit Act 1995, the proceedings may be brought only in the District
Court area in which you live.

District Court proceedings are started when the creditor issues a Civil Summons to
you. This summons states the creditor’s claim, for example, that you owe €5,000 for
goods bought on a specific date. The summons sets out a date on which the
proceedings are to start – this is called a return date. In Dublin, the case is simply
mentioned in court on the return date and a later date is set for the hearing of the case;
outside Dublin, the case is usually heard on the return date.

The summons gives you three options:
    If you pay the amount claimed within 10 days of the service of the summons,
      the proceedings will not start.
    If you intend to dispute the claim, you must notify the court of your intention
      to do so within seven days of getting the summons; you should use the Notice
      of Intention to Defend which is included with the summons; if you do not do
      this, you cannot just simply turn up in court and attempt to enter a defence.
    If you accept that you owe the money but you want to look for more time for
      payment, the summons indicates what you need to do; you must go to the
      creditor’s solicitor within 10 days and sign a consent form. In some cases, you
      may consent to payment by instalments.

The civil summons must be served on you at least 21 days before the return date. It
may be served in person at your home or by registered post. If it is not possible to
serve the summons in one of these ways, the creditor may ask the District Court to
allow substituted service – this means that it may be served in some other way, for
example, by ordinary post. If this does not succeed, for example, because the creditor
does not know your current address, the creditor may ask the court to deem the
summons to have been properly served.

The creditor must then provide proof of service either by oral evidence to the court or
by a statutory declaration of service. Any such documents must be lodged with the
District Court Clerk at least four days before the return date.

If you do not indicate your intention to defend the proceedings, there is no hearing
and the creditor gets a judgment that you owe the money. The creditor files an
Affidavit of Debt and a District Court Decree with the District Court Clerk. There are
different forms of affidavit depending on the kind of debt involved. These documents
constitute the District Court judgment set. These are then checked and, if all
documents are in order, the Judge of the District Court issues the judgment.
The judgment is for the amount owed plus the costs involved in the proceedings.

Having obtained the judgment, the creditor is then entitled to enforce the judgment.
Interest at the rate of 8% begins to run on the amount of the judgment (but not the
costs) from the day the judgment is given.


If you defend the proceedings
If you are defending the proceedings and have sent your form indicating your
intention to defend, then the issue goes to a hearing before the District Court judge.
The judge hears the arguments from the creditor and from you and makes a decision.
That could be to make a judgment in favour of the creditor or to dismiss the action. If
the judge considers that you cannot pay the amount through no fault of yours, the
judge may grant a stay of execution for a period of time.

The judge may make an order for payment by instalments. If you do not defend the
proceedings, there is no hearing so it is highly unlikely that a stay of execution or
payment by instalments will be granted.

Procedures in other courts
The Circuit Court and High Court procedures are broadly similar to that which applies
in the District Court but there are some differences in the documents that are used and
the time limits involved.




Enforcement of judgments
Getting a judgment means that the creditor is now entitled to use various mechanisms
to get the money from you. This is known as enforcing a judgment – the legal term is
execution of the judgment. There are a number of different ways of enforcing a
judgment. The creditor chooses the means and can use several different means at the
same time.

In general, once the creditor has a judgment order, the judgment can be enforced.
Enforcement orders can be issued by court offices – the creditor does not have to go
back to court for the order. Creditors have 12 years from the date of the judgment to
look for enforcement orders. However, if the judgment order was issued six or more
years earlier, the creditor may have to apply to court for leave to issue execution.
Once issued, enforcement orders are generally valid for a year and may then be
renewed.



Stay of execution
The courts can grant a stay of execution. This means that the enforcement of the debt
is halted for a period. A stay of execution may be granted, for example, if you can
show that your inability to pay is not your fault. You cannot get a stay of execution if
you have not engaged with the proceedings.

The following are the main ways of enforcing judgments:
    Registration of the judgment
    Execution against goods
    Instalment order, followed if necessary by committal order
    Judgment mortgage

Other ways of enforcing judgments include attachment of debts, the appointment of a
receiver and bankruptcy proceedings, but these are rarely used for consumer debts.
Attachment of earnings is used only for orders of maintenance of spouses and
children.


Registration of the judgment
This involves the creditor registering the judgment in the Central Office of the High
Court. Judgments from the District Court, the Circuit Court and the High Court may
all be registered. Registering the judgment does not directly enforce the judgment. It
does, however, publicise the fact that there is a judgment against you and, as a result,
means that you are unlikely to be able to borrow further. Lists of judgments are
published by credit reference agencies (for example, in Stubbs Gazette and some
newspapers).

Before registering a judgment, the creditor must tell you that this is intended and give
you an opportunity to pay the debt.


Execution against goods
Execution against goods is one of the main ways of enforcing a judgment. It is
sometimes called distress against goods. It means that the creditor gets an order from
the court which directs the Sheriff or County Registrar to seize your goods and sell
them in order to raise the amount of money that you owe plus costs.
      In the case of a High Court judgment, the order directing the seizure of your
       goods is known as an order of fieri facias or fi fa
      In the case of a Circuit Court judgment, the order is known as an execution
       order against goods
      In the case of the enforcement of a District Court judgment, the court’s
       judgment or the decree itself is sent to the Sheriff or County Registrar for
       execution


Sheriffs and County Registrars
Sheriffs enforce judgments in counties Cork and Dublin while County Registrars
enforce them in all other places.

Sheriffs are self-employed people who are paid for their enforcement work on a
commission basis. The system is called poundage. The fees that they get are set out in
statutory instruments. The current one is Sheriff’s Fees and Expenses Order (SI
644/2005) made under the Enforcement of Court Orders Act 1926. This provides for
various fixed fees and a scale of fees related to the amount involved. This is 5% of the
first €5,500 and 2.5% of the balance. It also provides for the payment of various
expenses incurred in the enforcement process.

County Registrars are civil servants whose main job is to organise the business of the
Circuit Court in their areas. (They are also Returning Officers for elections and
referendums.)

As well as County Sheriffs in Cork and Dublin there are Revenue Sheriffs who
enforce debts owed to the Revenue Commissioners. They have the power to collect
tax debts. They can do this on the basis of a certificate of liability issued by the
Collector General (the official in the Revenue Commissioners who is responsible for
collecting taxes) and do not need a court order. Revenue debts can also be collected in
the normal way if there is a court order.


Seizing your goods
The Sheriff or the County Registrar does not have to give notice of intention to seize
your property or goods in order to execute a judgment. The duty of the Sheriffs and
County Registrars is to the creditor so they cannot take your circumstances into
account. Revenue Sheriffs have specific powers to make an instalment arrangement
with you.

The creditor may apply to court to have you examined about your assets so that it can
be established what assets you have that are available for the execution of the
judgment. Sheriffs and County Registrars have the power to go onto your property in
order to seize your goods. They must make reasonable efforts to do this peaceably and
without violence but they may make a forced entry.

The law provides that Sheriffs and County Registrars may not seize certain goods but
this is effectively meaningless because of the amounts allowed. They may not seize
your necessary clothes and bedding and the tools of your trade if the value of such
necessities is not more than £15 (€19). In practice, goods with a low resale value are
unlikely to be seized.

The Sheriffs and County Registrars must account to the court for the goods seized. If
no goods are found, they make a return of nulla bona, literally meaning no goods.

If Sheriffs or County Registrars do seize your goods, they must, within 24 hours, give
you an itemised and signed list of the goods seized. They may then sell the goods by
public auction – this can happen at any time from two days after the seizures. In
practice, you are usually given warning of the impending sale.



Instalment orders
The instalment order procedure is mainly used by small creditors such as shops and
credit unions. It can be used for judgments given in the District, Circuit or High
Court.

It is also used by creditors in family law proceedings, mainly for the enforcement of
maintenance orders. If you are a family law debtor, for example, if you have a
maintenance order against you which has not been met, your creditor can get an
attachment of earnings order which means that the money is deducted at source by
your employer.

Your creditor can apply to the District Court in the district in which you live to have
you attend the court in order to establish your means. The judge may then order
payment in full or payment in instalments, taking account of your means.


Failure to meet instalment order
If you fail to meet an instalment order, the creditor may look for a committal order
that would commit you to prison. The Enforcement of Court Orders (Amendment)
Act 2009 sets out the procedure for committal orders. This effectively provides that
you may be imprisoned for failure to pay debts only if you can afford to pay but
refuse to do so.

The process involves a summons to appear at the District Court. This is issued by the
District Court clerk at the request of the creditor. The summons must clearly set out:
    The consequences of a failure to turn up in court, including the possibility that
        you will be arrested and the possibility of imprisonment
    The options available to the judge at the hearing

You are required to prepare a statement of means and lodge this at least a week before
the hearing is due to take place.

If you fail to turn up, without reasonable excuse, a judge can either issue an arrest
warrant (this orders the Gardaí to bring you before the court at the earliest
opportunity) or adjourn the hearing.
If you are arrested and brought to court, a date is fixed for the hearing. The judge
must make clear to you, in ordinary language:
     That you are entitled to apply for legal aid

      The consequences, including imprisonment, of failing to comply with the
       instalment order or of failing to appear for the hearing on the date fixed

At the hearing, both you and the creditor may give evidence. The court has a number
of options. It may vary the instalment order. Alternatively, the court may ask you to
engage in mediation. MABS may be used for such mediation. The third option is to
make a committal order (for a maximum of three months). This can come into effect
immediately or at a later date. A committal order is an order to the Gardaí for your
arrest and imprisonment.

The creditor is obliged to establish, beyond reasonable doubt, that you have means but
you are wilfully refusing to pay.

The court has the power to grant you legal aid in accordance with the rules governing
the criminal legal aid scheme.



Judgment mortgage
The creditor may register a charge against property owned by you. The effect is the
same as taking out a conventional mortgage. You have to pay off the judgment
mortgage when the property is sold.



Bankruptcy
If you are unable to pay your debts, you may petition, or in other words apply to, the
High Court to be declared bankrupt. Alternatively, your creditor may apply to have
you declared bankrupt if certain conditions are met. If you are declared bankrupt, then
generally all your assets are transferred to the Official Assignee in Bankruptcy who
then distributes those assets in accordance with a set of priorities.

You are allowed to retain essentials up to a value of €3,100 (or more if the High Court
allows). If you acquire any property after you are made bankrupt, this also transfers
to the Official Assignee. Property and assets held in other EU member states are also
likely to be transferred. Your salary and pension may be appropriated by the High
Court for the benefit of your creditors.

A register is maintained of people who have been declared bankrupt.

You may be discharged from bankruptcy if you manage to pay your debts or if certain
other conditions are met. In any event, you may be discharged after 12 years (again,
there are some conditions attached). It is proposed to reduce this period to six years
under the Civil Law (Miscellaneous Provisions) Bill 2010.
Office of the Official Assignee in Bankruptcy
Phoenix House
15/24 Phoenix Street North
Smithfield
Dublin 7
Tel: (01) 888 6166
Web: courts.ie



Legal aid
Most court proceedings in relation to debt are civil proceedings. You may be eligible
for civil legal aid if you pass the means test and if your case is likely to succeed. If
you accept that you owe the debt and that you have no defence to the claim, then your
case is unlikely to succeed and you would not get civil legal aid.

If a judgment order is made against you, you are usually liable for the costs incurred
by your creditor in taking the case. These costs are added to the amount of the
judgment and can be enforced against you as part of the enforcement of the judgment.


Criminal legal aid
If you fail to pay an instalment order and you are summonsed to court for committal
proceedings, you may be eligible for criminal legal aid. The decision on whether or
not you get such aid is made by the judge dealing with the committal proceedings.



Social welfare overpayments

If you got money from the Department of Social Protection (DSP) which you were
not entitled to, you are generally legally obliged to repay it. This is the case whether
the overpayment arises as a result of fraud, a mistake by you or a mistake by the DSP.

However, the Department may, if certain conditions are met, defer, suspend, reduce or
cancel a repayment.



How overpayments arise
Overpayments of social welfare payments can arise in a variety of ways. For example:
    If you are getting a means-tested payment and your claim is reassessed
      because of a change in your means and it is decided that you are entitled to a
      reduced amount and that this applies retrospectively
    If you are issued with a duplicate payment and you cash both payments
    If you cash a dead person’s payment
    If you make a false declaration about your situation and get a payment to
      which you are not legally entitled
      If the Department makes a mistake and incorrectly awards you a payment or a
       payment at a rate higher than that to which you are entitled


Prosecution
If you have made a fraudulent claim, you may be prosecuted and convicted of an
offence. This may lead to a fine and/or imprisonment. The level of fines and length of
imprisonment vary in accordance with the gravity of the different offences under
social welfare law. Regardless of the outcome of the prosecution, you are still obliged
to repay the overpayment.



Procedure for recovery of money owed to the Department
If you have been overpaid, you owe a debt to the DSP. The DSP writes to you and
gives you 21 days in which to contact it about making arrangements for repayment. If
you do not do so, it sends you a reminder and gives you a further 14 days. If you do
not respond, it will try to recover the overpayment.

Overpayments may be recovered by
    Withholding arrears due to you
    Deduction from payments due to you
    Payment of a lump sum by you
    Regular instalment payments by you
    Recovery from your estate after your death

Any or all of these methods may be used. When deciding on the method and rate of
repayment, the Department takes into account the amount of the overpayment and the
circumstances in which it arose, and any facts or circumstances relevant to the
recovery.

If you are getting a social welfare payment, the usual practice is to recover any
overpayment by the withholding of any arrears due to you or by deductions from the
payment you are getting.

You may offer an amount to settle the case. This may be accepted when repayment is
being made from your estate or if recovery of the full amount would be impossible or
too costly.


Deduction from arrears
If the DSP decides to withhold arrears, you must be told and you must be given an
opportunity to give your views. However, arrears may be withheld without your
agreement.


Deduction from current social welfare payment
If it is decided to deduct the overpayment from your current social welfare payment,
the amount deducted is the maximum you can afford in order to recover the
overpayment as quickly as possible. In general, you should be left with at least the
level of weekly Supplementary Welfare Allowance (SWA) appropriate to your family
circumstances. In this case your prior agreement is not required. If deductions from
your payment would leave you with less than this, your prior written agreement is
needed.

You must be told before any deductions are made and you must be given an
opportunity to give your views. When you are informed and invited to give your
views, you have 21 days in which to do so. If you do not reply, the deductions may
start.

If you have been overpaid in the case of one payment, the overpayment may be
recovered from another scheme but not from Child Benefit. So, for example, if you
got too much Jobseeker’s Allowance and you are now on State Pension, the
overpayment can be taken from the State Pension. Any overpayment of Child Benefit
may be recovered from your due Child Benefit or from any other payment. The DSP
has also decided that an overpayment on another scheme is not recoverable from
Bereavement Grant, Widowed Parents Grant or Respite Care Grant.


Payment of lump sum
This method of repayment is most often used if your estate is being distributed after
your death.


Instalment repayments
This method of repayment is generally used where you are not currently getting a
social welfare payment, you are unable to pay a lump sum and you agree a weekly or
monthly instalment payment.



Deferring, suspending, reducing and cancelling repayment
The DSP policy is to try to recover overpayments in all cases. However, where it is
clear that a full recovery cannot be achieved, it considers reducing, suspending,
deferring or cancelling the repayment. When making any of these decisions, all the
circumstances are taken into account and you are given an opportunity to put forward
your case. Deferral, suspension and reduction of repayments mean that the repayment
is still owed.


Deferral
Repayments may be deferred where it is clear that you are unable to make repayments
now but you may be able to do so in the future. You may be considered for deferral if:
    You are getting a social welfare payment that is at the SWA rate and you have
      not agreed to deductions being made
    You make a credible case that you are unable to make repayments at this time
      due to your financial circumstances
      You are no longer getting a social welfare payment and the outstanding debt is
       less than €1,000


Reduction or suspension
Repayments may be suspended or reduced if something happens that prevents you
from continuing to make the agreed repayments. This could be illness or
unemployment or another event that causes a reduction in household income.


Cancellation
Cancelling the repayment means that the repayment is no longer regarded as owed.
Debts have to be cancelled if you die and you have no assets or if the Statute of
Limitations applies. The Statute of Limitations generally requires that a claim for the
debt must be made within six years.

The DSP may cancel the repayment if there is no realistic prospect of you repaying
the debt or where there is no reasonable prospect of recovering the debt within a
reasonable timescale without incurring considerable administrative costs. This may be
done, for example, if the cause of the overpayment was an error by the Department or
the HSE (in the case of SWA payments) and the amount is not significant.



After death
If you were getting a social assistance payment before your death, your personal
representatives must give the DSP three months’ notice of their intention to distribute
your estate. If it is established that you were overpaid, then that overpayment can be
recovered from your estate, after your funeral expenses and legal fees have been paid.
If there are no assets, then the debt is effectively cancelled as it cannot be recovered.

If you were not getting a social assistance payment, then there is no obligation on
your personal representatives to inform the DSP of their intention to distribute your
estate. However, if you owe money to the Department, it is a debt that must be paid
from your estate, together with any other debts and before the estate is distributed.



Court action to recover the overpayment
The DSP tries to recover the overpayment by the means set out above. If you have
made no reasonable efforts to repay the money you owe, then the Department may
decide to take legal action. In general, the Department does not take legal action
unless the amount involved is greater than the cost of taking legal proceedings and
where you are in a position to discharge the debt.

Further information on the recovery of social welfare overpayments is available at:
www.welfare.ie/EN/OperationalGuidelines/Pages/codm.aspx
Taxes


In general, you are expected to pay your taxes on time and in full. If you fail to do
this, the Revenue Commissioners have a range of options for collecting the tax due.


Prosecution
If you fail to pay your tax on time, you may be prosecuted and convicted of an
offence. This may lead to a fine and/or imprisonment. The level of fines and length of
imprisonment vary in accordance with the gravity of the different offences under
revenue law. Regardless of the outcome of the prosecution, you are still obliged to
pay any taxes owed.



How Revenue collects taxes that are overdue

The main ways in which Revenue collects overdue taxes from individuals are:
    Phased payment arrangements with or without the application of interest
    Collection by the Sheriff – this is the most common method
    Court action
    Attachment of a debt

Receivership or liquidation may also be used in the case of companies.


Phased payment arrangements
If you owe money to the Revenue Commissioners for unpaid taxes, you may be able
to agree a repayment arrangement. However, in general, interest applies to any late
taxes and so you must pay this as well. In some cases, penalties may also apply.

If you are paying income tax through PAYE and you underpay in a particular year,
you may be able to pay the amount due by having your tax credits in a subsequent
year reduced. In general, interest is not applied in these circumstances.

In other cases where you have not paid or have underpaid your tax, you may be able
to agree a phased payment arrangement. This generally does involve the payment of
interest as well as the amount owed.


Collection by Sheriff
If you get a final demand from the Revenue Commissioners for the payment of any
taxes due and you do not respond,

Revenue may refer your case to the Sheriff for enforcement. It is not necessary to
have a court order. There are 16 Sheriffs appointed by the Minister for Justice and
Law Reform to carry out debt collection for Revenue.
The Sheriff is given a warrant that is a legal document conferring authority on the
Sheriff to enforce collection of Revenue liabilities, if necessary, by seizing goods. A
warrant is valid for 12 months. However, if the Sheriff fails to collect any of the
liability within six months, the certificate mustbe returned to Revenue. The Sheriff
has the authority to negotiate a payment arrangement with you, not exceeding two
years.

Once your case has gone to the Sheriff, you must then deal with the Sheriff. You
cannot deal with Revenue officials as this is part of Revenue’s agreement with the
Sheriffs. Revenue Sheriffs are officers of the courts and are responsible to the courts.
There is a Code of Practice for Revenue Sheriffs available on the Revenue website,
revenue.ie.

Revenue Sheriffs are paid in the same way as other sheriffs


Court action
Revenue has contracts with six firms of solicitors to help enforce Revenue debts.
They are involved in taking cases through the courts in the normal way. If judgment
orders are granted by the courts, the orders are enforced in the normal way.


Attachment of a debt
The Revenue Commissioners have specific powers of attachment of debt which can
be exercised without a court order.


Local authority housing loans

If you have a loan from a local authority for buying or improving your house and you
are having difficulty making your repayments, you may be able to make an
arrangement with the local authority.



Payment by instalments
Section 11 of the Housing (Miscellaneous Provisions) Act 1992 provides that the
local authority may make such monetary arrangements with you as it considers
equitable to take account of your particular circumstances. In effect, this means that, if
you are having problems making your repayments, you should approach the local
authority to see if you can make an arrangement to pay over a longer term or to
restructure the repayments in some other way.

Each local authority deals with such cases in its own way. The Department of the
Environment has recently issued guidelines to the local authorities. These are based
on the Financial Regulator’s code of conduct for banks and building societies.

The Housing (Miscellaneous Provisions) Act 2009 provides that where you owe
money to a local authority either for rent or loan repayments and the local authority is
satisfied that you would otherwise suffer undue hardship, it may make an arrangement
with you to repay by instalments. This section (Section 34) is in effect in respect of
loan repayments (since 14 June 2010) but not in respect of rent.

If you owe loan repayments to the local authority, you may be charged interest at a
rate of 6% on the amount as long as they remain unpaid. However, there is no interest
charged on outstanding amounts that arise when arrangements have been made under
Section 11 of the 1992 Act (Statutory Instrument 483/2010). (The 6% interest charge
also applies to rent, clawbacks under the affordable housing scheme and charges on
incremental purchase or tenant purchase of apartment schemes.)


Orders for possession

If you continue to fail to meet your repayments, the local authority may seek an order
for possession in the usual way.

Debts are recoverable as simple contract debts.



Utilities codes

Suppliers of electricity and gas are required by their regulator, the Commission for
Energy Regulation (CER), to have codes of practice for dealing with customers who
have difficulties paying their bills and who are building up arrears of payments.
Website: www.cer.ie


If you have a problem with paying your gas or electricity bill, you should contact your
supplier to try to work out an arrangement to pay by instalments or some other
arrangement that you can manage. The CER code of conduct on disconnections
applies to all domestic electricity and gas suppliers. It provides that your supplier is
obliged to facilitate payment plans or alternative methods of payment, for example, by
installing a pre- payment meter. If you are engaging with MABS or voluntary
organisations such as the Society of Saint Vincent de Paul, the supplier is obliged to
work with them.

It provides that the supply of electricity and gas may be cut off only as a last resort.
The supplier must give you at least seven days notice of intention to disconnect you.
(This may soon be raised to 14 days.) You cannot be disconnected (the preferred
industry term is de-energised) if:
     It is a Friday, the weekend, a public holiday or the day before a public holiday
     You are using electrically powered life-supporting equipment
     You are an older person and it is between November and March

If you are cut off, there is a charge for reconnection. At present, the CER is
considering reducing the cost of reconnections by half; this would mean that you pay
half the cost and the supplier pays the other half. This, if introduced, is intended as a
temporary measure.

The following companies supply residential customers and each has its own code of
conduct:

ESB Customer Supply Code of Practice for billing and payments:
www.esb.ie/esbcustomersupply/business/downloads/ coc_billing.pdf

Bord Gáis customer codes: www.bordgais.ie/networks/index.jsp?a=1284&n=641&
p=103
Bord Gáis supplies both electricity and gas.


Airtricity Customer Charter - Billing:
airtricity.com/roi-domestic-aboutus-customer-charter- billing

Flogas Natural Gas codes of practice:
flogasnaturalgas.ie/codesofpractice.php


Other companies who supply industrial and commercial customers also have codes of
conduct or charters.



Waste charges
If you have not paid the charge levied by your local authority for the collection of
waste within two months of the due date, the local authority may take court
proceedings against you for the payment as a simple contract debt. It is not a criminal
offence to fail to pay.

If you have a contract with a private waste collection agency, any debt owed to it is a
simple contract debt.

You may be eligible for a waiver of the waste charges. There are different waiver
schemes in different local authorities.




Television licence

It is an offence not to have a TV licence if you have a TV set or equipment capable of
receiving a TV signal. The maximum fine on first conviction is €1,000 and €2,000 for
a second or subsequent offence.

Television licence fees are payable to An Post. (The Minister for Energy,
Communications and Natural Resources may designate another body as the issuing
agent but at present it is An Post.)
If An Post considers that you do not have a TV licence and you are obliged to have
one, it may send you a reminder notification. This can be delivered personally or sent
by post. This gives you 28 days to pay. If, after two such notifications, you do not pay
the licence fee, An Post may serve you with a fixed payment notice. This is similar to
fixed payment fees for certain motoring offences.

You now have 21 days in which to buy your TV licence and pay the fixed payment
fee. The fixed payment fee is one-third of the licence fee. At present, it is €53.

If you do not buy your TV licence and pay the fixed payment fee, you may be
prosecuted in the District Court.

An Post may look for judgment for the outstanding payments as a simple contract
debt.



Non Principal Private Residence Charge
The Non Principal Private Residence Charge is payable on any residence that you
own, except for your principal private residence.

If you fail to pay the charge on time, you are subject to a late payment fee of €20 a
month. The local authority may go to court to get judgment for the amount as a simple
contract debt.

Any unpaid charges or unpaid late payment charges remain as a charge on the
property and are payable if the property is sold or inherited.

It is an offence to fail to pay the charge. If you are convicted, you may be fined up to
€2,000 and, after that, you may be fined €100 a day for every day the charge remains
unpaid.



Debts after death

When you die, any debts you have must be repaid from your estate before any other
claims on the estate can be met. This is the case whether or not you have made a will.

If you die and have no estate, then your debts die with you as they cannot be repaid.
Your relatives are not liable for your debts unless they have provided personal
guarantees for those debts.

Your creditors may sue your estate for the payment of outstanding debts.
Your estate
Your estate is all the property, goods and money that you own that are available for
distribution after your death. Certain property and money may not form part of your
estate at all.


Family home
If you and your spouse are joint owners of the family home, your spouse becomes the
sole owner on your death. If there is a mortgage on the family home, then your spouse
becomes liable for that mortgage but is not liable for any of your other debts. Your
house or your share of it does not form part of your estate.

If you are the sole owner, then your family home does become part of your estate and
is available for the payment of your debts.


Insurance policies
Some insurance policies have a nominated beneficiary. In those cases, the proceeds of
the policy go directly to that beneficiary and do not form part of your estate. In other
cases, the proceeds of the insurance policy do form part of your estate and are
available for the payment of your debts. What happens in any particular case depends
on the terms of the policy.


Credit union deposits
If you were a member of a credit union, you would have nominated a person to
become entitled to up to €23,000 of your savings on your death. This does not form
part of your estate.


Joint bank accounts
If you have a joint bank account with another person or people, the question of
whether your share of the account forms part of the estate depends on the intention of
the account holders when the account was opened. If it was the intention that the other
account holder(s) would inherit your share, then your share does not become part of
your estate. If this was not the intention, for example, if the account was in joint
names purely for convenience, then your share – which may be the entirety of the
account – does become part of your estate.



Duty of personal representative
When you die, all your assets are gathered together by your personal representative
(the executor or administrator who administers the will).

The first duty of the personal representative is to pay your funeral and other expenses
and then your debts.
Your estate is considered to be insolvent if you do not have enough assets to pay your
funeral and other expenses and all your debts. If you have no assets, then the payment
of your debts does not arise. If you have some assets but they are not sufficient to
cover all your debts, the debts must be paid in a set order. If your estate is solvent,
there are rules about which assets are to be used first to pay your debts.



Information about your debts



Credit reference agencies
A number of different agencies compile information about debtors. These are known
as credit registers, credit reference agencies or credit bureau. They are available to be
consulted by lenders to see if you, as a potential borrower, have ever defaulted on
loans.

The general aim of these agencies is to ensure that the members have access to your
history in relation to your level of indebtedness and your history of repayments and,
therefore, to ensure that they are in a better position to assess your ability to repay any
future debts.

Credit rating agencies (for example, Moody’s, Fitch’s, Standard & Poor’s) generally
assess business debts and have little relevance to consumer debts.

Credit agencies may publish lists of judgments registered in the Central Office of the
High Court (for example, such lists are published in Stubbs Gazette and some
newspapers). This is public information. You have no control over its publication or
the use that is made of it.



Credit reference agencies in Ireland
Credit reference agencies collect negative information and positive information about
consumers. Negative information is information about any default on credit
repayments, such as arrears, missed payments and bankruptcies. Positive information
is information relating to your overall financial standing such as your overdraft limit,
the limit on your credit card and records of your repayments.

The main credit reference agency in Ireland is the Irish Credit Bureau (ICB) but there
are a number of other agencies. The ICB compiles a private database of information
supplied by its members. It includes information on a wide range of loans including
personal loans, mortgages and credit card loans.

That information is available only to its members. Its members are the main financial
institutions, including many credit unions. Local authorities are also members.
Membership does not include utility companies or retail outlets.
The ICB does not make a decision on whether or not you get a loan. The information
available from it helps the financial institution to decide whether or not it should lend
to you.


Information about you
There is no information about you on this database if you have had no active loans in
the past five years or if your lender has not provided that information to the database.
If there is information about you in the database, it is retained in an individual credit
report. The information in your credit report includes

      Your name, date of birth, address(es) used by you in relation to financial
       transactions
      The names of lenders and the account numbers of loans you currently hold, or
       that were active within the last five years
      Repayments made or missed for each month on each loan
      The failure to clear off any loan
      Loans that were settled for less than you owed and
      Legal actions your lender took against you

The system records when a financial institution has consulted it so you can find out if
this happened in your case. The financial institutions that are members of the ICB are
required to provide you with details of any credit reference agency it has used when
assessing your application for a loan.


Consent
Your consent is required for the provision of information about your credit history to
the ICB. However, it is standard practice that such consent is an integral part of your
credit agreement.


Ensuring information about you is correct
You have the usual rights under data protection legislation to access the records held
about you by credit agencies and to have incorrect information rectified. You may ask
the agency to provide you with a copy of the personal information it holds about you.
You may request an application form for this online, at icb.ie, or by telephone on (01)
260 0388. If the information is inaccurate, you may ask the agency to correct it. If you
are not satisfied with how the agency deals with you, you may appeal to the Data
Protection Commissioner, dataprotection.ie.


Requirement to consult information on databases
The EU Directive on consumer credit agreements (Directive 2008/48/EC) which is
implemented in Ireland by Statutory Instrument 281/2010 – European Communities
(Consumer Credit Agreements) Regulations 2010, provides that creditors, before
agreeing to give you a loan, are obliged to assess your creditworthiness based on
sufficient information obtained from you and, where necessary, from a database of
such information.
 It also provides that, if you are refused credit because of the information found on the
database, the creditor must immediately tell you this and give you particulars of the
database used. This legislation applies to personal consumer credit agreements for
amounts between €200 and €75,000 and it does not apply to mortgages. In Ireland, it
will not apply to credit unions until December 2011.


Regulation of credit agencies
At present, there is no regulation of credit rating agencies or credit reference agencies.
There is an EU proposal to regulate credit rating agencies:
ec.europa.eu/internal_market/securities/docs/agencies/propo sal_en.pdf


Credit scoring
Credit scoring is a technique developed by financial institutions that places applicants
for credit into different categories. Credit scoring is carried out by financial
institutions and by credit reference agencies. In the case of credit reference agencies,
your credit report is given a credit bureau score. This is made available to a lender on
request (if the lender is a member of the credit reference agency).

If you have a good record of repaying a loan, then you get a high score. You get a low
score if your repayment record is poor. The only way to improve your credit score
(more commonly called credit rating) is to improve your repayment record.


Credit reporting
The Interim Report of the Expert Group on Mortgage Arrears and Personal Debt (see
below) recommended that the Irish Credit Bureau should expand its database for its
members to include all loans including personal guarantees. The Financial Regulator
has announced a review of credit reporting arrangements, including the proposal for
compulsory reporting by all lenders.



Mortgage Arrears and Personal Debt Report

The final report of the Expert Group on Mortgage Arrears and Personal Debt has been
published.

The group was established in February 2010 to make recommendations to the
Minister for Finance on options for improving the current situation for families with
mortgage arrears on their principal private residence and with personal debt. Its
interim report was described in the August 2010 issue of Relate.

The final report focuses on what it describes as advanced forbearance in relation to
mortgage debt; social housing; and personal debt.

The report provides detailed information on mortgage arrears and indebtedness
generally. It includes information about the number of mortgages that are in arrears,
the extent to which they are in arrears, the rescheduling of mortgages, the numbers of
repossessions and the overall levels of personal debt. It also includes information on
forbearance schemes in other countries.

The full report is available at finance.gov.ie.



Mortgage debt

In its interim report, the Group recommended that all lenders should develop and
publish a Mortgage Arrears Resolution Process (MARP). This provides a framework
for handling arrears. You, as a borrower, are required to co-operate with it in order to
avail of the benefits of the Code of Conduct on Mortgage Arrears. Under this process,
lenders fully assess your situation. A Standard Financial Statement is developed for
this assessment. The lender then agrees appropriate forbearance if you are likely to be
able to sustain the mortgage in the long term. Forbearance measures can include, for
example, paying interest only, temporarily postponing payments, extending the term
of the loan, or capitalising the interest and arrears. These are considered to be standard
forbearance measures; they do not result in any reduction in the amount owed but
simply provide for a different way of paying this amount. Lenders do not apply
penalty interest or arrears charges if you are taking part in the MARP.

The Central Bank has revised its Code of Conduct on Mortgage Arrears in light of the
report. Lenders have been directed not to impose arrears charges or surcharge interest
on borrowers who are in arrears and who are co-operating with the MARP, with effect
from 1 January 2011. The code will now also apply to borrowers who notify their
lender that they are at risk of arrears.


Advanced forbearance
Advanced forbearance means measures that go beyond standard forbearance to the
point of debt forgiveness. The group does not recommend a formal debt forgiveness
scheme. It does, however, recommend further, or advanced, forbearance for those
borrowers for whom standard forbearance techniques may be inadequate but who
have sustainable mortgages.


Unsustainable mortgage
In its interim report, the Group had recognised that some mortgages are unsustainable
and voluntary surrender of the house may be the best option in these cases. In its final
report, the group examined what constitutes a sustainable mortgage. The group takes
the view that if you can afford to pay the interest on your mortgage, then the mortgage
is sustainable. If you are unable to do this over a significant period of time, it is likely
that the mortgage is unsustainable. However, if you can make substantial part-
payments on the interest portion of your mortgage, you may have the capacity to
secure the sustainability of the mortgage if you are given sufficient time. The ratio of
the amount of your loan to the value of your house is not directly relevant to whether
or not your mortgage is sustainable – in effect, being in negative equity does not
make the mortgage unsustainable; it is your ability to service the mortgage that is
important. (The report recognises that negative equity is a significant problem if you
want to sell the house.)


Proposed deferred interest scheme
The main advanced forbearance technique suggested by the group is the proposed
Deferred Interest Scheme (DIS). This scheme would be voluntary on the part of
lenders. The group recommends that all mortgage lenders be asked to commit to the
DIS or an equivalent scheme. Lenders representing the majority of the market have
already indicated their willingness to implement this or an equivalent scheme and the
remaining lenders are being asked to do so. (Some lenders have indicated that they
will not implement it.)

The DIS should enable borrowers who can pay at least 66% of their mortgage interest
(but less than the full interest) to defer payment of the unpaid interest for up to five
years. You should not have to pay interest on the deferred interest. You will have to
pay all the interest eventually; there is no debt forgiveness. You would be expected to
pay as much as you can afford but the minimum would be 66%. How much you can
afford would be determined by the Mortgage Arrears Resolution Process. The
deferred interest would be a charge on the property in the same way as the capital.

When the accumulated amount in the deferred interest account is equal to a total of 18
months’ interest, or when the borrower has participated in the DIS for up to five
years, the mortgage may be deemed to be unsustainable.

The DIS facility would be available to you if:
    The mortgage was taken out to purchase, improve or re-mortgage your
      principal place of residence only.
    The mortgage was taken out before the introduction of the Code of Conduct
      on Mortgage Arrears came into effect , that is, before 27 February 2009.
    You have entered and co-operated with the MARP, with asset disposals taking
      place as necessary and any guarantees taken into account.
    There has been a minimum period of six months in which you and the lender
      tried to address repayment difficulties. Specifically, you must have been
      unable to pay the full amount of interest due under an interest- only
      arrangement.
    You cannot afford to pay the full interest on your mortgage but can, at
      minimum, pay 66% of the interest due.
    You agree not to take out any further loans. (There should be some flexibility
      about this, in particular, if a loan is for business purposes and would improve
      your financial situation.)

A DIS arrangement would be reviewable periodically. If the mortgage becomes
unsustainable, then other options should be considered including voluntary surrender,
assisted sale, trade down or repossession.
Social housing

If your mortgage is unsustainable and your house is repossessed, you may be
dependent on social housing supports. The group recommend that the Department of
the Environment, Heritage and Local Government should quickly implement new
regulations (currently being developed) that will enable borrowers whose mortgage
has been deemed unsustainable to become eligible for social housing assessment
before a repossession order has been made or repossession has actually taken place.

The group recommends that a mechanism be put in place that would enable the
borrower and lender to agree to a voluntary repossession, with actual repossession
deferred for a specified maximum period or until such time as the housing authority
has sourced appropriate accommodation.

The group considered but did not recommend a Government-funded mortgage-to-rent
scheme. It also examined the possibilities for local authorities to enter into lease-type
arrangements with lenders in respect of properties held under unsustainable mortgages
but concluded that there were significant legal difficulties with this kind of
arrangement.



Personal debt
The group recommend that there should be two significant changes to the current
arrangements for dealing with personal debt:
     New bankruptcy legislation with a less punitive approach
     A non-judicial debt settlement and enforcement system which would be an
       alternative to bankruptcy in most cases

The Law Reform Commission’s Report on Personal Debt Management and Debt
Enforcement is due to be published before the end of the year so the group did not
examine the legal issues in detail. This report is likely to include recommendations on
changes to the law on personal insolvency, including the bankruptcy laws. It is also
expected to recommend changes to the law in relation to enforcement procedures and
to deal with consumer debt settlement including non-judicial debt settlement.


Non-judicial debt settlement
The group endorses informal methods of debt settlement, such as contractual
arrangements between debtor and creditor(s) or debt repayment plans negotiated
through the Money Advice and Budgeting Service (MABS). It recommends that the
voluntary model of informal debt management operated through the Irish Banking
Federation/Money Advice and Budgeting Services Operational Protocol be developed
as a template for extension to other credit providers, including utility companies that
are concerned with the issue of personal over-indebtedness.

The group’s proposals for a non-judicial debt settlement system are meant to apply to
cases where there is no dispute as to the liability and where a debtor who has acted in
good faith is insolvent and owes multiple debts.
In a non-judicial debt settlement arrangement, the time for the discharge of the debt
should vary in accordance with the amount of the debt. Debtors in the system should
retain a reasonable income.


Citizens Information
The Citizens Information Board provides independent information, advice and
advocacy on public and social services through citizensinformation.ie, the Citizens
Information Phone Service and the network of Citizens Information Services. It is
responsible for the Money Advice and Budgeting Service and provides advocacy
services for people with disabilities.


Head Office
Ground Floor
George’s Quay House
43 Townsend Street
Dublin 2
t      + 353 1 605 9000
f      + 353 1 605 9099
e info@ciboard.ie
w www.citizensinformationboard.ie

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