Just over 100 insolvency deals done in three months

Average write-down on secured debt is 17 per cent, agency says

The Director of the Insolvency Service of Ireland, Lorcan O’Connor. File photograph: Eric Luke / THE IRISH TIMES.

The Director of the Insolvency Service of Ireland, Lorcan O’Connor. File photograph: Eric Luke / THE IRISH TIMES.

Mon, Jul 14, 2014, 13:54

Just 124 deals on debt were done under the auspices of the Insolvency Service of Ireland (ISI) in the second quarter of 2014 according to figures published yeserday.

The State agency set up last year to help distressed borrowers admitted the number was low, but it insisted the rate of pick-up was increasing as people became more familiar with the options open to them.

However critics have said that low number of applications being successfully processed proves that the agency has been a “failure”.

Since the ISI began accepting applications from borrowers unable to service their loans last September it has processed over 850 cases involving €330 million in debt of which 45 per cent, or €148 million, was mortgage debt related to a debtor’s principal private residence.

The latest tranche of ISI statistics show that in cases involving secured debt - largely made up of home loans - saw anywhere between 0 and 61 per cent of the residual debt being written off. The average write-down on secured debt - once outlying figures at the top and bottom of the scale have been removed - was at 17 per cent.

When it comes to unsecured debt, the amounts being written of was over 80 per cent.

The head of the ISI Lorcan O’Connor accepted that “the numbers have been low to begin with, they are increasing every month and the trend is moving in the right direction as people become more comfortable with the suite of ISI debt solutions”.

He encouraged anyone with serious debt issues to consult one of the growing network of approved intermediaries and personal insolvency practitioners throughout the country.

According to the ISI, in the three months to the end of June, 98 people were declared bankrupt under new rules which came in to force last year. All told 164 successful bankruptcy actions have been concluded since the start of the year, compared with 58 in 2013. The total debt involved in bankruptcy adjudications in 2014 was €278 million compared with €55 million in 2013.

The ISI says there was also a threefold increase in the number of debt arrangements approved during the past three months compared to the first quarter of this year.

It said its figures showed an overall acceptance rate of 74 per cent by creditors for debt settlement arrangements and personal insolvency arrangements (PIAs).

However when PIAs - which include mortgage debt - are looked at in isolation, one in three potential deals are unsuccessful.

The ISI also published a debt settlement arrangement (DSA) Protocol which will see agreed documentation and standard terms and conditions being used through the application process by debtor representatives, creditors and personal insolvency practitioners.

Mr O’Connor said the protocol was “very important as its existence is expectedto result in the faster development of proposals, faster acceptance by creditors and higher acceptance rates by creditors”.

He said that when such a protocol was introduced in England and Wales creditor acceptance rates for individual voluntary arrangements, the equivalent to Ireland’s DSA, rose to over 95 per cent.

The data raises a number of major concerns and proves that the insolvency system is not fit for purpose, said the Irish Mortgage Holders Organisation (IMHO).

There are well over 100,000 people in mortgage distress with their family home in Ireland and each having other unsecured debt. Families are crippled with debt, many are seeking a way to resolve their debt, the insolvency service was to be a game changer and to date this has failed to materialise”, said its chief executive David Hall.

“These figures show, no matter how attractively they are presented, that it’s not working in a crisis that affects hundreds of thousands of citizens. The insolvency service last quarter completed a pathetic 27 personal insolvency arrangements and 30 debt settlement arrangements.”

“In addition there is a concern where with such small numbers, 26 per cent of arrangements fail after the protective certs have been issued at a cost to debtors,” added Mr Hall.

“We are now six years into this personal debt crisis and the main anchor expected to help people is clearly not working. The Government needs to be mature and admit this act, while well intentioned, has been a failure.” he said.

Leading advocacy group New Beginning welcomed the publication of the new protocol which, it said would make the DSA system more efficient.

It accounts for one third of the overall combined debt settlement arrangements and personal insolvency arrangements reported in the ISI statistics and 35 per cent of adjudicated bankruptcies.

“The reality is that tens of thousands of people are insolvent and our job here is to fix them as quickly and efficiently as possible - this will benefit everybody. It takes structured systems such as a DSA or bankruptcy to ensure that the problem is resolved properly and permanently,” said New Begining’s Ross Maguire.

He said misinformation coming from various sources was presenting a challenge as the new system was bedded down.

“Many commentators in this space have no qualification or experience in insolvency and despite good intentions can undermine the system by misrepresenting it. We welcome the announcement by the ISI that they are to embark upon an information campaign in the autumn so that people will have the information they need.”