It has been alleged that banks are trying to stop mortgage holders in arrears entering into insolvency arrangements approved by the Insolvency Service of Ireland.

Applications for debt deals are due to be accepted by the Insolvency Service of Ireland (ISI) this Monday the 9th September 2013, however it has been alleged that banks are writing to mortgage holders in arrears to persuade them to agree a debt deal outside this new service.

Letters allegedly shown to journalists of the Irish Independent, show that banks are warning people that the state insolvency deals are restrictive, and homeowners in arrears would be better off making a more informal deal with the lender.

Homeowners with mortgages in arrears who want to agree a deal in relation to these arrears will have to avail of a Personal Insolvency Arrangement. Personal Insolvency Arrangements cover both secured debt (i.e. mortgages) and unsecured debt (i.e. credit cards or personal loans).

A Personal Insolvency Arrangement can last a number of years and its aim is to help people get back to a position where they can reasonably service their debt. If some of the debt is unsustainable, it is hoped that the bank will write off some of the debt.

The Insolvency Service of Ireland.(ISI) has established reasonable living expenses guidelines to ensure people have a reasonable sum of money to live on before they pay back their debt. These guidelines can be downloaded here or from the ISI website.

There are also 2 other options for people with debt, Debt Relief Notices and Debt Settlement Arrangements. Both of these options deal with unsecured debt so this means mortgage debt cannot be included in these arrangements.

Mark Hennelly of David Walley + Co Solicitors has recently completed a Personal Insolvency Practitioners Certificate in the Law Society of Ireland and he would be happy to advise you of your options in relation to your debt. Mark is also advising clients in relation to selling property in negative equity and negotiating with banks for consent.