Relate. Dealing with debt. Terms used. Special edition December Contents

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1 Special edition December 2010 Volume 37: Issue 12 ISSN Contents Relate The journal of developments in social services, policy and legislation in Ireland Page No. 1 Dealing with debt 1 Terms used 3 Debt collection 3 Court procedures for judgment 5 Enforcement of judgments 7 Social welfare overpayments 9 Taxes 10 Local authority housing loans 11 Utilities codes 12 Debts after death 13 Information about your debts 14 Mortgage Arrears and Personal Debt Report 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 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. INSIDE: Sheriffs and County Registrars p6, Bankruptcy p7, Collection of overdue taxes p10, Credit reference agencies p13, Deferred mortgage interest scheme p15, Proposals for dealing with personal debt p16

2 page 2 Relate - December 2010 Citizens Information Board 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, hirepurchase 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.

3 Citizens Information Board Relate - December 2010 page 3 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 noncommercial 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 (see page 14) 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 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 (see page 14) 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.

4 page 4 Relate - December 2010 Citizens Information Board The general rules do not apply to taxes. There is a fouryear 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.

5 Citizens Information Board Relate - December 2010 page 5 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

6 page 6 Relate - December 2010 Citizens Information Board 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 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.

7 Citizens Information Board Relate - December 2010 page 7 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 Office of the Official Assignee in Bankruptcy Phoenix House 15/24 Phoenix Street North Smithfield Dublin 7 Tel: (01) 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.

8 page 8 Relate - December 2010 Citizens Information Board 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.

9 Citizens Information Board Relate - December 2010 page 9 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: 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.

10 page 10 Relate - December 2010 Citizens Information Board 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 must be 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 (see page 6). 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

11 Citizens Information Board Relate - December 2010 page 11 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: 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 prepayment 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: coc_billing.pdf Bord Gáis customer codes: p=103 Bord Gáis supplies both electricity and gas. Airtricity Customer Charter - Billing: airtricity.com/roi-domestic-aboutus-customer-charterbilling 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.

12 page 12 Relate - December 2010 Citizens Information Board 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

13 Citizens Information Board Relate - December 2010 page 13 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

14 page 14 Relate - December 2010 Citizens Information Board The system records when a financial instition 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) 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 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.

15 Citizens Information Board Relate - December 2010 page 15 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 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 partpayments 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 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 interestonly 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.)

16 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 f e info@ciboard.ie w 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. 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. 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 LOG ON LO-CALL Open Mon to Fri, 9am to 9pm DROP IN For your local centre see Golden Pages listing