DEBT FORGIVENESS SHOULD no longer be taboo and it cannot be ignored as a very real issue and possible way forward for this country. It’s also one of the most personal and private elements of my story and is the number one item that I am asked about on a daily basis.
I wanted my experience and the telling of my story to make a difference to people and, if I were to be true to that position and maintain credibility and the respect of the people who had contacted me, I would have to share the whole story. Dealing with the problem of the enormous debt I carry is a key part of that story.
When I was doing radio interviews while promoting Shepherd’s Pie, I was a guest on a Newstalk radio show Chris O’Donoghue asked, ‘Why should I pay for your collapse?’ or words to that effect, because he had never borrowed recklessly during the Celtic Tiger years. He was furious at the prospect.
I understand that it is a difficult and emotive subject, but I believe that we must talk about it.
For as long as the debt forgiveness argument keeps preventing action, we do nothing but continue to drag out this recession/depression for everyone. It is avoidance on a national scale. Hence I found myself paddling upstream in terms of trying to deal with my own debt problem, because it was clear that no legislation was imminent and that the politicians weren’t even planning to properly debate the concept.
I never knowingly borrowed without intending to repay the loan in full. Pre-2008, in both my personal and commercial life, I repaid every cent I borrowed, often ahead of the term expiring.
When I started to borrow in 2002 I did so in an effort to make some decent money over my lifetime in business, so that I would leave my children and their children in a strong financial position. I knew that clearing the loans I had drawn down would be a lifelong obligation that would necessitate the expansion of the business to secure this financial future, but my loans were all asset-backed with bricks and mortar. The bank was willing to lend and I was willing to borrow, under conditions that the bank imposed and that I honoured.
Deal done and agreed by both parties.
But then the banks moved the goalposts by seeking additional security as well as more interest and, ultimately, more margin for themselves. That wasn’t the deal I had signed up to.
Post-2008, with declining rental income and a substantially reduced salary, I faced huge arrears on my loan repayments, so I decided to address the issue with the bank by declaring that I couldn’t service the loan repayments at their current levels. To continue to attempt to do so would threaten my mental and physical health, and I was unwilling to force my children to face the possibility of a future without their father as a result of the stress and depression that my attempts to service these loans were causing.
I saw the pitfalls ahead. I knew that it would be a long and difficult road but that there would be light at the end of the tunnel so long as neither my health nor my family unity was compromised. My responsibility was to prioritise how I spent my limited income. That started with keeping a roof over my kids’ heads, followed by keeping food on the table. That was my major focus in 2009 and 2010 – pure survival.
Once I had done what was necessary to ensure those basics, I turned my attention to dealing with my negative equity. House prices were down fifty per cent from the peak they had reached in 2007. The value of commercial buildings set by NAMA at approximately fifty-six per cent of their original value was now leaning towards thirty-five per cent of their original value. I could see no way back from this decline. No recovery was in sight and all I could see in the future was a lifetime of struggling to pay arrears and interest on arrears. I battled to sell residential property in a market where ghost estates were being sold off for prices that meant in one case the individual houses were worth just over €10,000 each.
By the time I considered the reaction of the banks to my dumping property and leaving a residual debt, I couldn’t have cared less what the bank might do to me. I was ruined anyway. Every property investment I had made was in the gutter. Every share I had purchased was worthless. The banks were to get the assets, as per our deal. I would get nothing but the possibility of further exposure because of my personal guarantees, which were fairly useless because the banks had charged and cross-charged all of the properties, and the collapse of property values ruled out the use of the guarantees anyway.
I have considered the morality of not repaying in full any loans I had, as, ultimately, the Irish taxpayer is now paying. I don’t believe that, morally, I’ve failed to fulfil my side of the deal I had with the banks – in fact, the opposite is true. I honoured my obligation by returning the assets to the bank. The reality is that banks were in deep shit because supporting documentation, security and the formulae used to establish a borrower’s ability to service loans initially were flawed – none of my property deals were ever stress-tested as presumably even the banks thought that property values would only go one way.
I have entered into a programme with the bank to bring about a resolution to my debt. That programme is the best possible option for both me and the bank, given the state of property values in Ireland. I have had a proportion of my debt resolved, but I will also be repaying a portion of it for many years, which I fully accept. I am a participant in a programme of debt resolution and as a result I feel relieved to have reached a conclusion about my future.
I don’t believe that the banks are working towards debt resolution on a case-by-case basis. That would suggest that they are assessing all distressed loans and proactively communicating with their customers about them. They are not. This I know because clients I am working with at Insight have told me that they have debt but they have not been approached. A programme of debt resolution will only be triggered when the borrower proposes a plan with which the subject can be broached.
Stopping the banks from controlling me was a turning point for me. I’m very unclear as to why the banking sector has not taken steps to announce that a debt-resolution programme is in place and, if a distressed customer were to apply to the programme, then a similar formula tailored to their particular situation but based on the same model could be applied.
Start picking away. Start investigating. Apply your own pressure, but engage. Ask questions on everything that you don’t understand and don’t lose sight of the fact that when you borrowed the money, day one, you had a deal. You got the money and they got the property if it all went pear-shaped. Don’t give any more security. Just say no and refer back to the original agreement.
Don’t give in and don’t be swayed by slick marketing and advertising campaigns showing the caring side of a bank that wants to help you, communicate with you and work with you to rebuild. Absolute horse shit. If the banking sector was sincere in that message, they should start by communicating in a far clearer manner what they want customers to do, and let them know that they are willing to discuss a programme of debt resolution if that is what is required for a business or personal recovery.
As for me, I am in a programme of debt resolution which likely means that millions of euro will never be repaid. But I won’t walk away scot-free. I have lost the property portfolio that I paid big deposits on from my own cash reserve built up over years of hard work. Those properties were my pension. I will have paid a small fortune to the banks in interest, fees, charges and margin along the way. I will be servicing a long-term residual debt for many years into the future and my ability (and desire) to ever borrow again has been destroyed, which may impede growth in my business.
On the other hand, I believe that I honoured my end of the agreements I had to the best of my ability and that I did not walk away until an acceptable resolution was found. I worked with the bank up to the very end. It has cost me the failure of three businesses and the process has hurt many, including my wife and parents. So yes, my debt has been reduced but I’m not walking away smiling.
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