Day of reckoning arrives as insolvency service begins work
The insolvency process offers hope for those with both secured debt – such as mortgages – and unsecured debt, including credit cards
Finally, it’s here. As of yesterday, the newly constituted Insolvency Service of Ireland (ISI) started taking applications from people hoping to escape from under the burden of their debt as they seek to enter arrangements with creditors.
It’s been a long time coming. The new service will provide not just a chink of light but hopefully a resolution of their debt problems.
Who will use the service?
The Government has predicted that about 18,000 people will avail of the new service, while Stubbs Gazette puts it higher – at about 25,000 – in the first year alone.
Regardless of the exact number, advisers across the State are experiencing demand for their services and it’s an issue that’s very much on the minds of those who have struggled to deal with their debts as austerity has bitten over the last five years.
“I had an email about it last night at about 12.05. It shows that people are staying up thinking about the idea of insolvency, asking themselves, ‘Is this the right thing for me to do?’” says financial adviser and personal insolvency practitioner Frances O’Hanlon.
The process is suited to those with both secured debt – such as mortgages – and unsecured debt, including credit cards and personal loans, who are technically insolvent and cannot meet repayments on their loans. The new service presents a possible way out.
According to a spokesman for Mabs, people are calling the advisory service to talk about a variety of debts, ranging from car loans to personal loans, to money lenders, but that mortgages are “the main area of focus”.
“The biggest fear for people is retaining their family home,” says Mark Ryan, and providing for this is a key facet of the new regime.
However, insolvency is not going to be for everyone.
“This is a serious road – it’s not to be feared by people who genuinely need it, but we have said to some people, ‘This is not for you’,” O’Hanlon says, adding that some people might have options to broker a deal with their creditors outside of the insolvency process.
“If I felt some day a bank would write it [your debt] down anyway, I’d say don’t dream of going through an insolvency arrangement; you might be better off holding tight for now.”
The new insolvency regime is creating a new type of professional – a personal insolvency practitioner or PIP.
Authorised by the Insolvency Service, a PIP will be a solicitor, a barrister, a qualified accountant or financial adviser, and will guide people through either a debt settlement arrangement or a personal insolvency arrangement.
“Our role is clear: we’re there as mediators to broker a fair deal between the individual and the creditor,” says O’Hanlon.
“Authorised intermediaries” will advise on debt relief notices, which in practice is likely to mean a visit to your local branch of the Money Advice and Budgeting Service (Mabs).
Choosing the right PIP for you is going to be an important part of the process. As Ryan, a PIP and accountant with Quintas in Cork notes, a debt arrangement can only happen “once in a lifetime”.