Blog Archive - Property Accountancy Services

Further to Mr Patrick Honohan’s comments that the “banks will have to be more aggressive in repossessing properties in the buy-to-let sector” a couple of points should be noted.  Firstly, as a company working closely with buy-to-let investors, we are unaware that the banks were ‘holding off’ on being aggressive with landlords.  In our experience working with our clients, we have found that the banks have already been taking an aggressive approach with borrowers, and it has taken considerable effort on our part to get the banks to agree to any arrangement with the borrower. In addition, many landlords have cross-secured their buy-to-let investment with their home, so if the bank seek repossession, this will place the landlords home at risk.

 

Since the downturn landlords have seen their rental income drop, increases in variable mortgage interest, the introduction of NPPR, USC on rental income, the reduction of mortgage interest that is tax allowable to 75% and the recent introduction of the household charge.  Take a landlord who has rental income of €12,000 pa . If is mortgage is on a variable rate, his interest repayments will typically also be €12,000 pa, of which he can only allow €9000 against his rental income, so he will be liable for tax, USC etc on €3000.  He will also pay €300 in property taxes and will have other bills for service charges, maintenance costs etc.  Unless the landlord has losses forward from previous years or unused capital allowances, he will be paying income tax on a negative income.

 

If the banks insist on repossessing buy-to-let properties, they will either sell them at a vastly reduced price, leaving the landlord with the remaining debt leveraged against his home, or the bank will attempt to manage the properties themselves.  Managing buy-to-let properties is not the banks area of expertise.  The bank would be better coming to an arrangement with the landlord with regards to his loan repayments and allow the landlord to manage his property himself, or with the help of a property management company, who have experience in the area and can maximise rental income and therefore enable the loan to be paid off over time.

 

At SCK Group, we have been working with our clients to help them navigate what has been a difficult time for landlords.  We have been negotiating with the banks on their behalf and have had some success in this.  Many landlords have not been utilising all the capital allowances available to them and we have been able to reduce their tax bill by advising them in this area.  Some properties have fallen into disrepair because landlords have not had the money to pay for ongoing maintenance.  When we realised that this was preventing landlords getting tenants for their properties, we set up our Property Refurbishment Scheme, whereby we will carry out the repairs, pay the up-front costs and then the landlord can repay us overtime from the rental income.  This year, because we recognise the extra burden placed on landlords, we are going to pay the NPPR (second home tax), for all new properties let and managed by us.

www.sckgroup.ie/property-management-services

Simon Ball, writing in today’s Irish Independent gives a timely warning to those PAYE people who have moved out of their homes and have their property rented out to a third party.  The resulting rental income may be chargeable for income tax, even though the individual considers him or herself a standard PAYE worker.  A lot of individuals are not fully aware of this and their obligation to file a tax return before 31st October.  It is essential that people in this situation keep enough money aside from their rental income to cover the tax that may be due. Preliminary tax may also be due for the following year.  Failure to file a tax return on time can lead to additional surcharges and interest.

At SCK Group we can advise you on allowable expenses in relation to an investment property.  We can complete your rental accounts and can file a tax return for you.  If we let and manage your property, we will complete your rental accounts or file your tax return for FREE.

Owner-occupiers, Landlords and Tenants of Aras Na Cluaine, Yellow Meadows, Clondalkin are concerned following recent newspaper articles re High Court Proceedings against the Developer in relation to issues raised by the fire officer.

At SCK Group we have been liaising with Aras Na Cluaine Management Company Ltd to ensure that the issues are satisfactorily resolved.

Below are relevant links

http://bit.ly/foImfN

http://bit.ly/ehd4Lw

Many landlords will be relieved to read in today’s Irish Times of the Daft report which shows that Rent Costs have levelled out in Ireland.

THE COST of renting residential property in Ireland appears to be levelling out, according to a report by property website Daft.ie.

Rents fell by just over half a per cent last year compared to a 15 per cent drop in 2009 and 10 per cent in 2008. The largest drop, of over 7 per cent, was recorded in Leitrim, which also had the cheapest rentals in the country at an average of €467 a month.

Rents for Kerry dropped 7 per cent to an average of €617 and, while rents in Wicklow dropped by 3 per cent last year, it remained the most expensive place to rent outside the capital, with an average monthly charge of €922.

Dublin city centre saw the largest increase last year going up by almost 3 per cent. The average rent there was €1,134, but it did not top south Co Dublin where the average rent was the most expensive in the country at €1,303. It increased 2.2 per cent last year on 2009.

Rents in north Dublin city fell by more than 2 per cent to an average of €985.

Rents in Offaly were unchanged at an average of €604 a month and in Galway and Cork cities there was very little change, with average rents at €804 and €824, respectively.

The availability of properties also dropped; the total number available to rent nationwide fell from a high of over 23,000 in mid-2009 to less than 16,000 at the beginning of this month.

http://bit.ly/eHo4ly

Read the full Daft report on:

http://bit.ly/eAXLv

This article was in the Irish Times Property Supplement on 27th Jan and explains why things have become so difficult for landlords recently. Just 1 small point; PRTB is now €90 not €70 as stated in the article.

Far from being members of a fat-cat elite, many small-time property investors say they face bankruptcy if Section 23 tax reliefs are phased out, writes CAROLINE MADDEN

MENTION the phrase “Ireland’s landlord classes” and it conjures up images of a rackrenting, bed-sit- peddling elite who simply sit back and watch the money roll in from their vast property empires. In reality, today’s landlord is much more likely to be a small-time, buy-to-let investor, with one or two white elephant properties, who is now facing death by a thousand cuts.
Last Thursday night, about 250 such property investors gathered on Dublin’s northside for a meeting of the Irish Property Owners Association (IPOA), where they expressed fears of financial devastation. Many warned they would face bankruptcy if the curtailment of Section 23 tax relief announced in Budget 2011 went ahead.

The following afternoon, IPOA members and thousands of other investors breathed a sigh of relief as the Finance Bill put the Section 23 proposals on ice until at least 2012. However although they have been granted a reprieve, it is only temporary.

In last December’s Budget, Minister for Finance Brian Lenihan announced that property-based legacy reliefs were to be phased out. The most controversial element of this related to Section 23 tax relief on rented residential property in tax-designated areas.

The main attraction of this type of property for investors was the ability to offset between 75 and 90 per cent (typically) of the purchase price against all of their Irish rental income, thereby cutting their tax bill.

However Minister Lenihan announced that from January 1st 2011, the relief could only be offset against rental income from the Section 23 property, as opposed to rental income from all of the investor’s Irish properties.

As the rents on Section 23 properties tend to be low, and borrowings are almost always high, little or no taxable income arises on such properties. Therefore if the tax relief were to be ring-fenced in this way, it would become worthless for many investors.

Doubtless the Government banked on the public appetite for meting out punishment to anyone associated with property development to carry this proposal through. However the big property players would have escaped unscathed from any such restriction, as they were generally able to use up their all of their reliefs or allowances in the first year or so.

Instead, small individual investors – from middle-class full-time landlords to tradespeople to pensioners – would have found their unused Section 23 relief effectively guillotined this year.

Representative groups argued that to retrospectively change the terms of the incentive was unfair, as investors had a legitimate expectation of being able to claim the full relief as offered to them by the State at the time of investing.

The Government was inundated with several hundred submissions to this effect and announced it was delaying the change, ostensibly to allow for the completion of an economic impact assessment.

In reality, as Labour finance spokeswoman Joan Burton summed it up last week, what the Government has done is to simply kick the can down the road.

It will take at least six months for the assessment to be completed, by which point it will be someone else’s problem as a new government will be in place.

If the Labour Party gets into power it is unlikely to take a softer line with property investors than the current Government, but it is impossible to predict whether the Section 23 proposals will eventually be implemented, changed or scrapped.

A recently-formed group, Justice for Investors, is encouraging investors to continue lobbying TDs and the Minister for Finance on this issue because of the uncertainty surrounding it. It has provided sample letters and TD lists on its website, justiceforinvestors.com.

Paul Reynolds, president of the Institute of Professional Auctioneers and Valuers (IPAV), has highlighted the fact that the deferral of any decision on property incentives has created serious uncertainty in the market. Investors now find themselves caught in a limbo – whatever hope they had of selling a Section 23-type property before, they have even less chance now.

This tax-shelter saga is not the only thorn in the side of property investors. In the 2009 emergency Budget, the amount of mortgage interest that could be offset as an expense against rental income was reduced to 75 per cent (from 100 per cent).

According to a Munster-based landlord (who did not wish to be identified) with more than 20 properties and no other source of income, this is a more serious issue for investors than the proposed restriction of Section 23 reliefs as it affects everyone who owns a second property and rents it out. “It’s not purely rack-renting fat landlords,” he says. Many investors are just waking up to the impact of this change now, as they only became aware of it when they filed their tax return three months ago.

“It’s a bigger but less immediate problem. People are going to slowly go bust,” says the landlord.

“With the 75 per cent mortgage interest restriction, there is no case for investing in residential property in Ireland,” he says. “You can only lose money.” He makes the point that if, for example, an individual earns €1,000 a year in rent, and they pay €1,000 in mortgage interest, (ignoring other expenses) they are breaking even. However they can only deduct €750 for tax purposes, and therefore will be taxed on €250, even though in reality they did not make a profit.

“It’s one thing to pay tax on income you have. It’s quite another to pay tax on income you don’t have,” he says. He believes that if the 75 per cent interest restriction is not repealed, he’ll be “wiped out” and the property market will not recover. “Investors are never coming back into the market while some of the interest costs are disallowed,” he predicts.

Like many investors, he is only repaying interest on his property borrowings at the moment. “I can only repay capital if I’m making a profit, so I’m interest-only.” He says he has been “invited” by his bank to begin repaying capital, but he has not been “compelled” to do so.

“If I was, it would be become a distressed loan, so the banks can’t afford to go there,” he says. Different banks have different approaches, though, and many investors have been contacted by their lenders in recent months to inform them that they are due to begin repaying capital on their borrowings.

In some cases, investors on tracker mortgages have been presented with two options: begin repaying capital as well as interest, or switch to a more expensive variable rate mortgage and remain interest-only for a further period of, say, two years.

The problem is that many landlords are struggling to meet their interest repayments, let alone repay the principal of the loan. Not only have rents shrunk, but the list of expenses landlords face has grown considerably longer. Firstly, there’s the annual non-principal private residence (NPPR) charge of €200, which cannot be written off for tax purposes.

If the investor’s property is divided up into different flats, bedsits or apartments, this charge applies to each of the units.

Management fees are another area of growing concern for owners of apartments, including buy-to-let investors, as they can run into thousands each year. Landlords also have to register every tenancy with the PRTB now, at a cost of €70.

And as of January 1st, 2009, all homes for sale or rent have been required to have a BER certificate, which indicates how energy efficient the property is. There is no set fee for getting a BER assessment carried out, as it depends on the type of property, but it usually costs between €120 and €300.

“A lot of people are in a situation where they would be better off to have nothing [no property],” a spokeswoman for the IPOA said. “They’d be better off on social welfare instead of working and paying money towards their investment properties. They’re in a situation where they have pared down their own expenses to the bare bone.”

With the most vulnerable sections of society being hit by budget cuts, and family homes being repossessed, there is little sympathy for those who saddled themselves with debt to join the landlord classes.

But with no property market recovery in sight, many investors will soon be forced to choose between paying their taxes and repaying their borrowings, at which point their problems will become the State’s problems too.

Multi-unit bill will prevent rip-offs

PAUL CULLEN

NEW legislation which came into force this week may help prevent apartment-owners being ripped off by management companies. The Multi-Unit Development Act, which was signed into law by the President, Mary McAleese, on Monday, addresses major weaknesses in current legal protections for people who buy units in apartment blocks.

A key provision is that ownership of common areas in apartment blocks or housing estates is transferred from the developer to the management company, controlled by owners, before any unit is sold.

Transfer of ownership must occur in a timely fashion for developments already completed or partially completed. This addresses a situation where developers have held on to a small number of units to retain control of the development company. It has led in some cases to management fees running into thousands of euro being levied on apartment owners.

Another requirement will be an annual minimum contribution of €200 per unit for a sinking fund to meet any large, unexpected or non-regular costs. One unit, one vote, will apply on management companies and owners will have to pay charges, whether they are a developer or not and whether the unit is occupied or not.

The Act is one of the last that the current Dáil will pass before it is dissolved. However, the related Property Services (Regulation) Bill, which provided for the setting up of a national house price register, didn’t make it through all stages in the Oireachtas. As a result, housebuyers and sellers will remain in the dark about prices, at least until a new Government tackles the issue.

Costs, benefits for landlords

ASSETS/INCOME

The dream of capital appreciation has been replaced by the nightmare of negative equity. Most investors who bought between 2004 and 2008 now find their borrowings exceed the value of their properties, in some cases by several hundred thousand euro.

Although rents are showing signs of stabilising, they have fallen to levels last seen at the turn of the millennium.

OUTGOINGS

Mortgage repayments : interest rates are set to rise; many investors are coming to the end of their interest-only term; and only 75 per cent of mortgage interest is now allowed as a deduction for tax purposes.

Annual Non-Principal Private Residence (NPPR) charge : €200 per unit

Cost of registering each tenancy with the PRTB : €70

BER assessment : €120-€300

John Lowe – The Money Doctor gives you some advice in managing your finances in this weeks Sunday Business Post
The easy way to fix your finances
23 January 2011 By John Lowe

Debt management is not just a simple matter of setting aside a certain sum each month to meet the mortgage, loan and other fixed repayments. It requires planning, prudence and a degree of discipline which many of us may have lost sight of during the boom years.

What is debt?

Debt comes in many shapes and forms, but can be divided into three simple categories.

1. Long-term debt: this mainly consists of mortgages, but can also include any other debt that you have held for longer than seven years.

2. Short-term debt: borrowings Which would run for less than seven years and can include borrowings for car purchase, furniture, holidays, educational or other family purposes. Increasingly, this also includes conversion of hard-core overdrafts and credit card borrowings.

3. Running or current debt: typically, this would include bills which have to be settled every two or three months.

These include utilities such as electricity, gas, telephone/broadband, etc. Credit cards used for day-to-day expenditure would also be included here.

The crash of 2007/2008 has meant that most people who have been fortunate enough to hang on to their jobs have suffered sizeable reductions in real income, through a combination of pay cuts and income levies.

Add to this the interest rate increases for all but holders of tracker mortgages and the pressures on borrowers are all too obvious. Here are the key steps you need to take in tackling your debt.

Taking stock

Where are you now in your financial life and where do you intend to be at the end of this year? In five years? More importantly, where are you now in relation to 12 months ago and what steps have you taken to prevent any further drift ?

As I said, debt management is more than meeting your loan repayments as they arise. It should be an active rather than a passive exercise and should form part of a strategy of constant review. If you are in control of your finances now, it’s important to stay in control.

Where to start

1. Look at your family’s n et monthly income.

While you may Not be able to increase your gross earnings, it is important to ensure that you avail of all the tax allowances and credits et al.

For instance, have you claimed your medical expenses, dental costs, bin charges, your rent relief or pension relief for the last few years?

Social welfare and child benefit payments, additional jobs and any other forms of income should all be included in your net monthly income.

2. Now, consider your expenditure.

Many of us have no clear idea of our spending on such things as groceries, travel, entertainment or clothing. On the other hand, we know only too well how much we spend on utilities, heating, insurance, etc.

Keep a record of all your spending over a two or three week period – use a diary or a notepad – and involve your partner and family so that a full picture of family expenditure can be determined.

The initial shock of how much you spend on casual unwanted items will wear off. That bar of chocolate you munch every time you fill your car with petrol, the magazine you don’t have time to read – the list goes on.

3. Go through your bank statements over a three-month period, and have a look at al l standing orders and direct debits.

Are you still continuing to pay club subscriptions or making donations to charities which you no longer wish to continue? Consider each and every financial commitment: are they all necessary?

Remember the Money Doctor mantra: stop spending and, if you must, ensure best value.

Your expenditure can be broken into three categories, the ABC of expenditure:

A. Fixed outgoings: they consist of such things as mortgage/rent, loan repayments, electricity, gas, telephone costs, transport, educational, food and essential clothing, insurance, etc.

B. Discretionary spending: these cover all non-essentials such as entertainment, holidays, sporting and leisure activities.

C. Savings: these would include the provision of a rainy day fund – remember the ideal is to have three to six months annual income in an accessible account pension contributions, educational plans or other sums set aside to meet future expenditure for you, your partner and/or family.

By now, you should have mapped out your spending on a monthly or weekly basis.

You should then look at your fixed outgoings to see if there are cheaper alternatives. Electricity, gas, telephone/broadband and cable television are items that should immediately come to mind, but there could also be substantial savings to be achieved by shopping around for cheaper car and household insurance, and reviewing your life and health insurance.

Also, interest rates both for loan and savings products constantly change. What might have been the highest rate for your savings last year could very well be the lowest this year.

Now, have a look at your net monthly income and see how it matches up to your outgoings. All of these steps may achieve some savings, but essentially they merely consist of a tidying-up of your finances. This is something you should do every year, in good times or bad.

That is why you need to spend about two hours every month on your finances. By now, you will know your position and whether meeting your monthly commitments is causing, or is likely to cause you, problems.

Examine your Options

Mortgages

Your mortgage repayments are likely to be your biggest commitment but, in terms of interest rate, they are also the cheapest. If you are fortunate enough to have a tracker mortgage (tracked to the European Central Bank rate, now 1 per cent), do not be tempted to switch to any other product.

Trackers are like gold dust, and lenders are using all sorts of means to switch you from them.

Looking for an extension to your interest-only facility only gives them leverage to discuss that switch. Pay the full capital and interest repayment if needs must.

If, however, you are on a standard variable rate mortgage, some of these vary from lender to lender.

Check where your rate is compared to others on the market. If it is on the high side, you should first of all consider taking out a fixed rate with your existing lender.

Variable rates are set to continue to rise, even though the ECB rate will probably stay at its present level until late 2011. If you are not offered an attractive rate, you could shop around if you qualify.

You will be well placed to switch lenders if:

* your loan is less than 80 per cent of your home value

* you have sufficient earning to justify such a switch (as a rule of thumb about 4.5 times your annual income for both applicants)

* most lenders will approve a mortgage up to age 65, with a few up to age 70 and this has to be borne in mind if switching

* you have a good credit history, with no missed payments or judgments.

Personal loans

You may also have car loans, furniture or home improvement loans or overdrafts.

The ‘‘sniper approach’’ to getting out of debt should be adopted. This is where you ‘‘pick off’’ the most expensive debt first if you can. Some of these personal loans can attract interest rates over 16 per cent.

The greater the risk, the higher the interest rate.

Overdrafts

These are bank mechanisms for giving You money upfront – ie, a loan – on the promise of an eventual lodgment to the account to regularise the account, but charging you through the nose for it. They can also be misleading and lure you into a false sense of security.

Firstly, they are hugely expensive – personal overdraft interest rates start at around 13 per cent. Secondly the set-up charges, referral fees, unpaid fees, surcharges (an additional amount of interest – could be 1 per cent per month – chargeable if you exceed the overdraft limit without permission) are simply not worth it.

Managing without an overdraft is the ideal. Remember also the requirement for overdrafts is that they must be in credit for 30 days each year.

Credit cards

So you’ve ‘maxed out’ your credit card or cards, where you have used the full credit limits in your cards. What are your options? Paying 3 per cent of the balance each month will effectively create a 20-year loan for you based on the high credit card interest rates.

If your credit rating is good enough, however, and you are still in satisfactory employment, you could switch to one of the seven credit cards that offer 0 per cent on transferring your balance over to them for a period of time.

If you have an asset that you can dispose of in order to reduce your borrowings – such as a holiday home you rarely use, or even a second family car – be prepared to swallow your pride and take the hard decision. If you are sitting on any substantial level of savings, it would make sense to use some of them to payoff your most expensive borrowings, particularly credit cards or personal loans.

Also, if you are making monthly payments to a savings plan and you have sufficient rainy day funds, you should consider suspending the plan for a period and diverting the payment in reduction of your debts.

If none of these is an option you can avail of, then you could consider consolidating all your non-mortgage borrowings either on the security of an asset, eg, your home or, if allowable, in one unsecured personal loan and you can show the ability to repay. Credit unions are still obliging thousands of customers once they have been able to prove repayment capacity.

If your mortgage is sufficiently low, and you have good equity in your home, you may be able to convince your mortgage lender to let you top up the mortgage over its remaining term.

However, such loans are getting more difficult to obtain, with some of the bank lenders only accepting their own personal loans for limited consolidation.

Establishing priorities

The greatest priority for most of us must be to retain the family home. Therefore, maintaining mortgage repayments, no matter how small, has to be a must.

Other lenders can take various legal steps against you and impair your credit rating by registering missed repayments with the Irish Credit Bureau, but your mortgage lender is the only one who can repossess your home.

They have a legal charge against it.

Be proactive

If the warning signs are there in terms of an ever-increasing overdraft or a credit card on which you make the minimum payment each month, now is the time to take action.

Don’t wait until you’ve missed payments and the letters start to arrive. Ignoring communications helps no one, neither you nor the creditor.

With mortgages, all the lenders have an agreement with the government in terms of how to deal with mortgage arrears and the various time limitations of pursuing legal action, but this only applies where the mortgage holder is already engaged with the lender in relation to those arrears and is actively communicating.

Your mortgage lender will already have a dedicated section dealing solely with borrowers in arrears.

Taking early action can head off impending trouble, and will also impress upon the lender that you are determined to work your way through any problems.

Define your Endgame

Decide what you want to achieve, but also be realistic enough to know what is achievable.

Look at the trend in your finances over the last two years, and determine if your situation is temporary or likely to last for a number of years.

Have you any source of additional income coming available in the next few years, such as an inheritance, a maturing investment plan or endowment policy or anything of this nature?

Will any of your dependants become self-financing?

Will your partner be able to enter the workforce if unable to do so at the moment?

Will you yourself be able to develop any sources of additional income? Reinvention is fast becoming a buzzword in business circles.

In other words, if you are preparing to approach any of your lenders/ creditors to negotiate with them, be sure you can show them that, as far as possible, you have a plan that is realistic and achievable. Part of this approach will be cash flows, budgets and any potential dreams and plans for the future that will repay their debts.

First things first

Look at any short-term borrowings where the repayments are large relative to the size of the loan. If you can manage to extend the terms of these loans without attracting a higher interest rate or any punitive penalties, negotiate these first.

If you then decide to renegotiate your mortgage, it’s likely that the lender will give you their own version of an income and expenditure worksheet which you can complete from the budget template you’ve already prepared.

Current account statements, all loan statements, insurance policies, savings accounts and investments including pension contributions will all be required by your lender.

Going to the initial requested meeting armed with all these facts and figures will show your lender how serious you are.

What to expect

Your creditor/lender will by now have developed a good level of expertise in handling these situations, and will have a suite of tailored solutions to cover most scenarios.

The most likely financial solutions they will offer are:

* for mortgages, extending the term

* interest-only payments for six months, one or two years

* a moratorium on all repayments – capital and interest – for a number of months

* a top-up mortgage/loan to allow you to consolidate all your other loans.

The first option of extending the loan term ould be attracctive if it alleviates the problem – ie, eases the cashflow and allows capital and interest payments to be continued.

Bear in mind that, if you are on a tracker mortgage interest rate, extending your loan may terminate your original loan contract and you may be forced to accept a standard variable or fixed interest rate.Your lender will always send you full details of any switch agreed.

You will need to carefully read the same. Interest-only for a period will obviously help, as in many cases it can effectively halve your monthly payments.

The saying that you can’t make a silk purse out of a sow’s ear rings true: if you haven’t got it, you can’t give it. So lenders are forced to at least grant interest-only extensions for a set time. Obviously, this cannot go on forever, but there is little choice for the lender while the property market continues to weaken and sales are flat.

Some of the lenders will not give further interest-only extensions on home loans, but will approve payment reductions – this is tantamount to the same thing.

The third option, of a moratorium on all payments, is purely a very short-term solution and, unless your problem is also short-term – eg, due an inheritance – it will not really be of any assistance to you.

The final option of the top-up, if available, would be the optimum solution where additional funds are approved to consolidate other debts, possibly give you some upfront cash and some breathing space. In the present climate, this is probably the least likely, as all lenders have liquidity problems and have enough impairments without potentially taking on more.

In the absence of a top-up, a combination of the first two would be most beneficial to you, as it would extend the term of the loan and also give you the breathing space of interestonly payments for the initial period.

Give a little

In any negotiation case, there is give and take.

Your lenders will expect sacrifices to be made if you are looking to extend facilities with them. Just as with a new enterprise, prudent bankers like to see entrepreneurs invest their own money into a project before agreeing loan facilities; so too the debtor. To sum up, if you have debt issues, these are the steps you have to take.

1. Communicate: do not ignore creditors’ letters or calls. Burying your head in the sand will only prolong the agony.

2. Check your income: are there any other channels of income? If your employment has gone or your business ceased, have you reinvented yourself?

With financial commitments, they have to be serviced and income therefore has to earned. Dust off your CV, prepare that new business plan and create income. Jobseeker’s allowance or benefit should only be temporary.

3. Check your expenditure: do the analysis of your spending and prepare a full budget that you may need to show your creditors.

Show clearly where you have made cuts and sacrifices. If you haven’t got it, you shouldn’t spend it.

4. Give hope: if you have lost your job or ceased your business, you must have a plan that will at some stage recreate an income stream and recommence loan payments or fully pay off the debt. Declare your intention and put a time limit on the recovery yourself.

5. Pay something: even if your lender does not agree with your proposals, choosing to ignore demands or to pay nothing at all will only escalate repossession or worse, prison. If your interestonly extension request is refused by your lender, for example, you could cancel the lender’s direct debit and manually pay the interest each month on time.

By making these payments, you stand a far better chance of leniency should the lender take you to court.

Finally, take professional advice. I cite the example of golf professionals: they still use coaches.

SCK Group • PSRA Licence No. 002859
Seamus C. Kane T/A Seamus C. Kane and Associates is regulated by the Central Bank of Ireland
Seamus C. Kane T/A SCK Financial Services is regulated by the Central Bank of Ireland