Some debtors must be 'absolved', says Howlin
Irish banks will have to offer debt forgiveness to people who are not able to service their loans, Minister for Public Expenditure and Reform Brendan Howlin said yesterday.
Speaking days ahead of the passing of legislation aimed at tackling the debt crisis, the Minister said if a person could prove to an independent third party that they were not able to pay what they owed the debt would have to be written off.
The Insolvency Bill will be enacted this week and the measures contained within it will be fully operational by spring. It will allow debtors to emerge from bankruptcy after three years instead of 12 and write-off debts up to €3 million.
Mr Howlin said it would “come to a situation where people who are demonstrably, to a third party external view, not in the position to pay will be absolved of that debt”.
He said debtors could be given relief on debt which “isn’t sustainable” but insisted that there would have to be “some level of engagement between banks and borrowers to ensure that those who can repay, do so”.
Last week, AIB confirmed it would step up its pace of mortgage write-offs in 2013, by offering customers the chance to have some debt cancelled.
Minister for Justice Alan Shatter welcomed AIB’s confirmation that it would offer mortgage restructuring and the possibility of some debt forgiveness to customers who work with them, and he hoped other institutions would take a similar approach.
Speaking to RTÉ radio yesterday, Mr Howlin said there would be circumstances where repossession of properties bought as investments would be the “best solution”.
He was speaking after it emerged that the Republic’s main banks were planning to get tough on buy-to-let investors not servicing their debts.
Late last week, the Central Bank published details of the indebtedness attached to such properties. The figures show that 26,770 or 17.9 per cent were in arrears of over 90 days as at the end of September.
The outstanding balance on buy-to-let mortgage accounts in arrears of over 90 days was €7.9 billion, some 25.5 per cent of the total outstanding balance on such mortgages.
Banks are anxious to target investors not using full rental income to service loans.