The Problem of DebtThe MABS Perspective

MABS Presentation Living with Dignity – Promoting Social Inclusion Dunraven Arms Hotel Adare

18 October 2010

John LawlessNational Development Officer MABS National Development Ltd.

What is MABS?• The Money Advice and Budgeting Service is the only free, independent,

confidential and non-judgmental service, providing one-to-one advice to people having difficulty managing their money, are in debt or are in danger of being in debt.

• The service is funded and supported by the Citizens Information Board

• MABS Local - over 60 services nationwide• Limerick Office: Unit 9, Tait Business Centre, Dominic Street, Limerick.

• MABS Website – www.mabs.ie

• MABS Helpline -1890 283 438

MABS Mission Statement

To work towards the elimination of over-indebtedness through the provision of an accessible, free, confidential, independent, community and rights based Money Advice & Budgeting Service.

One of the Aims of MABS is to prevent:

• Homelessness• Fuel Disconnection (ESB, heating, cooking)

• The exclusion of the person from access to essential services (School, Water, transport, clothing, medical)

• The loss of Liberty

Source MABS Mission Statement

MABS seeks to achieve this mission by

• Identifying, supporting, and educating those experiencing or at risk of over-indebtedness especially those experiencing inequality in terms of access to financial services

• Facilitating empowerment of its Clients in a non-judgemental way

• Using the knowledge and experience gained from working with Clients to bring about changes in policy and practice on poverty and debt related issues

National Traveller MABS

• National Traveller MABS seeks to empower by supporting capacity building within the Traveller community and ensuring equality of access to legal and affordable financial services for all

One of the Strategic Priorities is: • Equality across all financial and related services: To

work with internal and external bodies to promote equality and diversity within financial services

Causes of DebtMoney difficulties can arise for various reasons

The most common reasons in our experience are:• Changes in life’s circumstance• Illness• Unemployment• Relationship breakdown• Over borrowing

Slippery Slope to Insolvency• Stage One The Debt Trigger unemployment, illness, etc.

• Stage Two Initial Missed Payment beginning of creditor pressure

• Stage Three Robbing Peter to pay Paul the spread of debt

• Stage Four Multiple Debts multiple pressure

• Stage Five Contact with Creditor promise to repay

• Stage Six Broken Promises further increased pressure

Slippery Slope to Insolvency contd.

• Stage Seven Personal Reaction depression, denial, strain on family relationships, fear, isolation

• Stage Eight Legal Pressure letters from creditors, letters from solicitors, court summonses,

court orders

• Stage Nine Financial Chaos enormous debt problems causing havoc

• Stage Ten Facing Sanctions home, utilities, loss of essential items, possible imprisonment

• Stage Eleven Further Losses marriage breakdown, deterioration of physical health, mental breakdown,

suicide

Psychological Effects• Blame (self/others)• Conflict (partners)• Constant tension and worry• Denial• Fear (of prison)• Feeling helpless• Frustration• Guilt• Hopelessness• Isolation• Loneliness

• No end is sight• No social life• No-one with whom to share anxieties • Pessimism• Sense of going mad• Shame• Vulnerability• Sleeplessness• Stigma (neighbors)• Stress and depression• Suicidal tendencies

MABS Approach...respecting the individual

• Self Help approach..... Providing the resources for self help

• Self Help with one to one assistance either on phone or in person

• One to one consultations• Negotiations with creditors and advocacy• Ongoing support

Case Assessment

• Financial Situation• Nature of the debt(s)• Urgency• Capacity to Pay• Capacity to deal with the issue(s)• Vulnerability• Personal Motivation• Family & Social context

Client Capacity

• Diminished capacity in a time of crisis• Literacy or language difficulties• Mental illness• Addictions• Education• Debt crisis one element of an overarching crisis

Client motivation

Distinguish between

Won’t Pay and Can’t pay.

MABS Plan for Dealing with Debt A holistic mediated approach

MABS Four Step Approach:

Step 1: Assess the situation

Step 2: Work out a budget

Step 3: Make proposals to the creditors

Step 4: Managing the payments

What are Priority Debts?

Some debts are more important than others. Important debts such as mortgage arrears, rent arrears, fines, and maintenance payments are called priority debts.

Because:•The family home may be at risk•A client might be evicted•Electricity, gas or telephone may be disconnected•Failure to pay a fine or disobey a court order may result in a prison sentence•The car or goods on hire purchase could be repossessed.

Secondary DebtsThese are debts where money has been loaned to a client without the client having to provide any security. The most common credit debts include:

Examples•Bank Overdraft •Catalogue Debts •Credit Card Debts •Credit Sales Agreements •Credit Union Loans •Personal Debts to friends and family •Personal Loans with Banks and Finance companies .

These are dealt with on a Pro Rata Basis

Making proposals to creditors

• A Budget is prepared• A Standard Financial Statement is prepared.• Verification of details on the Statement• Proposals are made to the Creditors• Priority Debts & Secondary Debts

MABS relationship with creditors

• An honest broker• Protocols in place with many of the main creditors• Irish Banking Federation members• Utility companies• Credit Unions• Individual creditors• Moneylenders

Where to from here ...from the current context into the future

• Rise in number of clients year on year• Increase in debt among self employed and middle

class • The new poor • Huge increase with clients presenting with Mortgage

arrears• Referrals to MABS from Credit Unions, Banks and

building societies, Courts, Social Workers, CWO’s and Society of Vincent de Paul etc.