Mick and Kate Kelly thought fleeing to England was the answer to their problems. Read this harrowing tale and find out why handing back the keys will not rid you of debt

Mortgage arrears are rising, but is handing back the keys the answer?

Limerick couple Kate and Mick Kelly felt they were in so much financial difficulty in Ireland, that they handed back their house keys to the bank and left the country for a new life in the UK.

Fleeing the country was “a relief”, Kate said and got rid of the "horrendous" harrassment by creditors who were phoning not just herself, but members of her family on a daily basis for money she didn't have. 

Under the strain, she and her husband decided they had no option but to walk away.

But now, she admits it was a naive decision. She says she “foolishly believed” she could “outrun” her debts and didn’t realise that they would eventually catch up with her.

Their home was sold but they are still left with debts of €70,000 on their mortgage. So handing back the keys is not the answer if you are slipping into mortgage arrears.

Read on to find out what you can do if you find yourself slipping into arrears. 

Also check all the links on the mortgage section on this RTE.ie/mnoney site which has been specially set up to help people get through the deepest recession the country has ever endured.

You will find useful links and fact sheets and names, addresses and telephone numbers for external organisations and agencies that can help if you find yourself in trouble with your mortgage.

Kate and Mick's case story

Here’s Kate and Mick Kelly’s story – as told to reporter Joe O’Shea on The Consumer Show on RTE. You can watch the show on the RTE Player by clicking on this link.

They bought their dreamhouse in county Limerick in 2005 little realising that recession a few years later would change their lives completely.

Both were in permanent employment. She was a civil servant and her husband worked for a furniture removal company.

“The mortgage was easily affordable at the start, there was no problem. We would have been able to cope with paying the mortage and surviving on one salary.

Then Kate’s husband lost his full time job – the couple had just increased their mortgage to €195,000.

So they put the house up for sale in June 2008, when the worldwide banking credit crunch was already well underway.

Initially, they put the house on the market for €230,000 and got no takers. Then they dropped the price to €195,000 but they still couldn’t find a buyer.

“Everything started to increase substantially. The price of the weekly shopping; things like home-heating oil and with the pay cuts and all the new taxes and levies, everything started to snowball out of control and basically we couldn’t cope with it,” says Kate.

“It did get to the point where we couldn’t make partial payments on the mortgage. The car finance people had written to us – they were repossessing the car that we had two years paid on and at that point I contacted MABS (Money Advice and Budgeting Service) but at that point there was a six or seven weeks before I could get an appointment.

'It was horrendous every single day'

Their creditors started closing in. “It was horrendous every single day. They were ringing me at work, ringing me at home anytime from 8am until 9am.

“They even started writing to my sister’s house. They just did not care,” said Kate.

Not knowing which way to go, they decided to run away.

“We ran away, we couldn’t cope with it any more, the pressure was too bad. We went to the UK and when we got here, the day we arrived we put the keys in a letter and posted them back to the bank

“I must admit, the feeling of getting on the plane was just one of relief thinking I don’t have to cope with that any more.

But although England offered a fresh start, Kate explained that running away did not get rid of the problem.

'We haven’t managed to outrun our debts'

The couple’s finances soon caught up with them.

“We haven’t managed to outrun our debts. Foolishly, that was one of the things we thought would happen.”

We have had solicitors letters looking for a shortfall of the mrotage and what the bank sold the house for.

Overall they owe something in the €90 to €100,000 and they are now trying to persuade the banks to agree to an affordable payment plan so they can start clearing their debts.

“We did leave it too late. The best advice I can give anyone if they think they are going the same way, is sort it out now and not end up losing everything like we did,” she says.

More than 50 struggling homeowners have already handed back their keys to the bank or abandoned their houses altogether after finding they could no longer pay any of the mortgage on a monthly basis.

Mortgage customers are protected by a very strict code of practice which prevents banks harassing customers. Banks are legally obliged to enter negotiations with those in difficulty so, as Kate says, the worst thing is to ignore the debt and not talk to the bank. The debt will eventually catch up with you, says Consumer Show presenter Eddie Hobbs.

However he also points out that it is illegal for creditors to contact relatives or to contact you at unreasonable times of day, Sundays or Bank Holidays.

Car financing companies etc however are not subject to the same strict code as banks but there are laws on harrassment and laws governing what moneylenders can and cannot do.

“Just because you are in debt doesn’t make you a second class citizen,” says Hobbs.

As long as you don’t engage in deceit or fraud, you have rights with respect to your bank, he adds.

It is estimated that somewhere between 40,000 and 60,000 homes will eventually be repossessed but banning repossessions is not dealing with the problem but simply delaying it.

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