Understanding and dealing with Debt A guide from KBC Bank Ireland

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1 Home Mortgages Understanding and dealing with Debt A guide from KBC Bank Ireland kbc.ie KBC Bank Ireland plc is regulated by the Central Bank of Ireland.

2 1 - Your Mortgage with KBC Bank Ireland Your mortgage with KBC Bank Ireland plc (KBC) is your most important financial commitment. You must ensure that your mortgage repayments are prioritised and met, above all other debts. As part of KBC s Mortgage Arrears Resolution Strategy (MARS), our aim is to work with our customers who are in financial difficulty to ensure they remain in their home. We are committed to finding sustainable, long term solutions for our customers. These solutions are subject to our customers engaging and adhering to the terms and conditions of any solutions offered. As a customer who is currently experiencing financial difficulty, it is important that you take action immediately. There are three messages which we would like to convey. 1. KBC is here to help. 2. In order to protect your home, your mortgage debt must be prioritised over all other debt. 3. If you find yourself in financial difficulty, please talk to us sooner rather than later. Call us on What we will do to help It is your responsibility to ensure that you keep up-to-date on your mortgage repayments. We will work with you to help you achieve this. However, you need to remain engaged with us in a meaningful way. Our goal is to ensure you stay in your home. In order to do this you need to make repayments. In some cases, your ability to make the agreed repayments can be affected by your other debt commitments. In such cases an alternative arrangement with your other creditors may be required. If you fall into arrears you must clear your arrears in order to protect your home. There are a number of ways KBC can help you, which are detailed in our Repayment Plan Process on the next page. If you are currently on a revised repayment arrangement, you must adhere to the terms of that arrangement. If you are worried about falling behind with your repayments, you must contact KBC as early as possible. Useful Hint: Remain engaged If you are currently on a revised repayment arrangement and do not think that you will be in a position to return to annuity repayments, you should contact us three months in advance of the expiry date of the revised repayment arrangement. 2 KBC Bank Ireland plc is regulated by the Central Bank of Ireland.

3 Repayment Plan Process 5 steps to staying on track with your mortgage 1 Engage Contact our Arrears Support Team on we are here to help once you engage with us. 2 Clear your arrears KBC offers a number of ways to conveniently repay. If you cannot clear your arrears, you need to contact us and discuss these options. 3 List your debts It is important for you to prioritise your mortgage repayments. The first step in understanding your financial situation is to list all of your debts. 4 Complete & return an SFS Fully complete and return a Standard Financial Statement (SFS), along with the supporting documentation to KBC. You can download an SFS from or call us and we will post one out to you. On receipt of your SFS we will assess your financial circumstances with you and endeavour to provide you with a repayment option based on your affordability. 5 Keep up your repayments It is important that if a repayment plan is put in place, you prioritise your repayments and work towards returning to full capital and interest (annuity) repayments. We will continue to be available to you to discuss any matters and we will review your account regularly. Useful Hint: Take early action Completing an SFS can take time and it is important to allow yourself enough time to gather all the information and supporting documentation that you you may need, which includes: 3 months recent bank statements for each party on the loan (originals or copies of originals; internet statements are also accepted where the customers name is included as part of the statement) Income verification for each party on the loan where evidence of income is not present on the bank statements. Where each party s income is not present on the bank statements provided, one of the following is also required (as appropriate): - 2 consecutive pay slips (most recent payslips) - Confirmation of social welfare payments (payment slip or letter) - P60 - Revenue Commissioners Notice of Assessment (for self employed customers). KBC Bank Ireland plc is regulated by the Central Bank of Ireland. 3

4 3 - Knowing the facts about debt What is Debt? There are two types of debt: Priority and Secondary (also known as unsecured) debts. Priority Debts Priority debts are debts that are more important than others. Mortgage repayments are particularly important because you could lose your home if you do not pay them. Below you will find some examples of Priority debts: 1 Mortgages A mortgage is a long-term debt that is secured against the property you purchased. In order for you to protect your home, you must ensure that your mortgage repayments are prioritised and met. 2 Utility Your electricity or gas may be disconnected if you do not pay these bills. The reconnection costs can be high. 3 Fines 4 Car You may have to pay a fine for not having a television licence or for other offences. If you have a hire purchase agreement or a lease on your car, this is a Priority debt as your car could be at risk if you default on your repayments. Secondary Debts Secondary debts are debts where you have received a loan, but you haven t given any security for it. These are also called unsecured debts. Below you will find some examples of Secondary debts: Credit card debt Personal loans (e.g. bank or credit union loans) Overdrafts Credit sales agreements Debts to mail-order companies Personal debts to friends and family Store Cards Debts to Moneylenders Your mortgage with KBC is a Priority debt. Your loan is secured against the property and, therefore, it is in your interest that the debt is paid on time. When a repayment is not made in full by the due date, the mortgage is then deemed to have gone into arrears. You can be taken to court if you fail to keep up the agreed repayments and you are at risk of losing your home. To avoid this happening, it is best to speak with KBC to see if an alternative repayment arrangement can be agreed. 4 KBC Bank Ireland plc is regulated by the Central Bank of Ireland.

5 Managing your Mortgage Repayments Determining what you can afford to pay towards your mortgage is very important. Your ability to repay is calculated by: Income - Household Costs (e.g. food, utility) = Amount available to pay debts To get a clear picture of all your debts it is best to list these out and separate your Priority debts from your Secondary debts. See below example: Priority Debts Priority Creditors Monthly Repayment due Arrears KBC 1,800 5,200 Secondary Debts Secondary Creditors Monthly Repayment due Balance outstanding Credit Card Company ,000 Once you have calculated the amount you have left over after all living expenses, the first thing you must do is prioritise your Priority debts. It is important to understand how to prioritise your debt repayments to ensure you receive a suitable Repayment Plan. If you do not prioritise Priority debt repayments, then KBC will not be able to provide you with a suitable revised repayment arrangement. How to deal with Secondary Debt Once you have engaged with KBC and addressed your Priority debt, any money left over should then be used towards your Secondary debt. The first thing you should do is contact those you owe money to, preferably in writing, to explain your financial situation. There are two ways you can engage with your Secondary Debt provider: 1. Forward the letter from KBC regarding the adjustment you need to make to your Secondary creditors. 2. Write your own letter. On the next page you will find a template letter to help you. Useful Hint: Remember to keep a copy of the letter you send. KBC Bank Ireland plc is regulated by the Central Bank of Ireland. 5

6 Draft letter for Secondary Creditor: Address Date Re Account No. Dear I am writing to you regarding the above account to inform you that I am currently experiencing financial difficulties and I am trying to resolve them. My first priority is protecting my family and my home. I have reviewed my current financial situation and have concluded that after repaying my household mortgage, other priority debt and essential household outgoings, I do not have the ability to meet all of my secondary debt repayments. In order for me to protect my home I must prioritise my mortgage repayments and reduce the amount I am repaying to my secondary creditors. I can afford to pay x amount, which I will provide to you on a monthly/weekly basis. Yours sincerely Mr/Mrs This guide is designed to give you guidance and does not amount to legal advice to you. If you need legal advice, we recommend you consult a solicitor. MABS may also be able to offer you guidance, see Sources of Assistance on the next page for contact details. Note: By reducing your payments on secondary debts your credit rating may be affected. 4 - Contact Information Arrears Support Team: Laser or debit card payments: [email protected] KBC Bank Ireland plc, Arrears Support Team, Sandwith Street, Dublin 2 One of our Arrears Support Officers can call to visit you. This meeting could take place at your residence or alternatively we can arrange to meet in one of our offices in Dublin, Cork, Limerick or Galway. Please call us on There are also comprehensive video guides and supporting literature available at Useful Hint: Keep an eye on your ability to repay If you are on a revised repayment arrangement with KBC, keep a close eye on all your monthly outgoings to help you identify any issues which may affect your ability to meet your revised Repayment Plan. 6 KBC Bank Ireland plc is regulated by the Central Bank of Ireland.

7 5 - Sources of Assistance For more information please refer to our Mortgage Arrears Resolution Process (MARP) booklet, available from or call and we will post one out to you. There are a number of agencies that are available to help. For a detailed list of these agencies visit our website Some examples include the Money Advice and Budgeting Service (MABS) and the National Consumer Agency (NCA). Both agencies are helpful sources of assistance and provide budgeting tools. MABS have a Self Help Guide to assist you if you are in arrears and they also have budgeting tools to help you assess your situation. These are available by visiting The NCA has developed a useful tool to assist you in getting an accurate picture of your spending habits. This is available online by visiting The NCA also provides a useful Budget Planner that helps you work out where you are spending your money and compares this with your income. Visit to access this guide. Independent Financial Advice Following the announcement in September 2012 by the Minister for Social Protection, Joan Burton TD, Independent Financial Advice (also known as Independent Long Term Mortgage Forbearance Advice) is available for customers who are offered long term mortgage solutions by banks in respect of their primary residence from a panel of participating Accountants. If you are eligible to participate in this scheme for the proposed long term mortgage solution on offer from KBC, we will pay this cost of 250 (plus VAT) on your behalf if you wish to avail of it. More information on this service including the panel of participating Accountants is available by visiting: You can also phone the Mortgage Arrears Information Helpline on (Monday to Friday 9.30am to 5pm). KBC Bank Ireland plc is regulated by the Central Bank of Ireland. 7

8 Consumer Protection Code 2012 Effect of Missing Repayments Warning: If you do not meet the repayments on your credit agreement, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit in the future. Consumer Credit Act 1995 Housing Loan Warning: Your home is at risk if you do not keep up payments on a mortgage or any other loan secured on it. Variable Rate Loan The payment rates on this housing loan may be adjusted by the lender from time to time. Endowment Loans Warning: There is no guarantee that the proceeds of the insurance policy will be sufficient to repay the loan in full when it becomes due for repayment. The early surrender of an endowment policy in respect of an endowment loan may yield a lower return to the borrower than that paid in premia and other charges. KBC (R09/13) 8 KBC Bank Ireland plc is regulated by the Central Bank of Ireland.