‘Don’t delay’ OSI urges consumers in debt to begin credit repair

Deputy supervisor of insolvency in the Office of the Supervisor of Insolvency (OSI) Fayola Evans-Roberts is urging people who are unable to meet debt obligations to begin credit restoration.

She said due to the stigma and shame around bankruptcy, struggling debtors tend to sink deeper into debt in an attempt to clear initial credit by taking out more.

“We have found that persons’ take-home pay has ranged from $1,000 – $5,000. Ninety per cent of salary just goes to paying debt… borrowing from Peter to pay Paul,” Evans-Roberts said during the Caribbean Credit Repair Association’s (CCRA) Credit Restoration Virtual Summit held recently.

“In the Insolvency Act of 2015, one of the things that we tried to do was to get away from the word bankruptcy. There were historical shame associated with the Bankruptcy Regime [and] persons were seen as having done some form of dishonesty,” she said, noting that the act focuses on credit rehabilitation and applying for bankruptcy is the last resort in managing insolvency.

The OSI functions as a licensing authority for insolvency practitioners, supervises the administration of insolvent estates, and ensures that trustees are in compliance with the Insolvency Act.

Evans-Roberts said that under the Act people who owe a minimum of $300,000 and are unable to either pay or have ceased paying the debt can seek assistance from the OSI to formally present a debt settlement proposal to creditors.

She pointed out that last year, due to the financial strain caused by the novel coronavirus pandemic on the livelihood of people who have either lost their jobs or have seen a reduction in their income, the OSI developed an informal proposal regime, where the organisation approached creditors on behalf of debtors.

“…Because everybody was aware of the effect of the pandemic, the creditors were willing to accept these informal proposals and for the very first six months we presented 28 proposals, and the creditors either gave them lower monthly payments, lower credit interests, or accepted a final settlement,” she said.

She said, too, that debtors who are found to be honest but have fallen in unfortunate situations can have their debts discharged within 12 months, but must receive financial counselling.

“In the long run, we know change of behaviour is going to take some time… but we expect that people will learn to manage debt responsibly and access credit responsibly so that they don’t end up in a place where debts are overburdening them,” Evans-Roberts continued.

The CCRA is an approved financial counsellor.

Once a person files for bankruptcy or even files for an insolvency proposal, some of the benefits include an automatic stay on legal proceedings, meaning other creditors won’t be able to pursue payment through the courts, the deputy supervisor said. In addition, there is no accrued interest on the debt, so the amount that is outstanding as at the date of bankruptcy is what is required to be repaid.

Source: Jamaica Observer