Insolvent professionals not allowed ‘trophy homes’ - ISI
Agency denies it will allow solicitors and consultants to retain houses they cannot afford
The Insolvency Service of Ireland has denied claims it will allow hospital consultants, accountants or solicitors will automatically be allowed to retain ownership of “trophy homes” they can’t afford.
The Insolvency Service of Ireland (ISI) has denied claims that insolvent hospital consultants, accountants or solicitors will be allowed to retain ownership of “trophy homes” they can’t afford because of their professional status.
Speaking on RTE radio on Monday night,accountant Jim Stafford said new Personal Insolvency Practitioners (PIPs) would be given leeway to assess the “type of house that might be needed for a professional person... as opposed to a house that’s needed by someone who is in the PAYE sector”.
He said that in negotiations between certain borrowers and their banks, he would be making “a very strong case, for example, that a solicitor should have a bigger house that accords with his professional status in society so that his neighbours and clients can see that, yes, this person is a good solicitor who is living in a good house”.
He claimed that the fact that such people’s insolvency would not be relevant. “Remember, if we want the solicitor to continue to earn money or the accountant or the hospital consultant, it’s important that he has his tools of trade,” he said and added that he was dealing with clients who are “insisting they continue to stay in their palatial houses”.
In response yesterday the ISI said that the Personal Insolvency Act 2012 made it clear that while a PIP was not required to come up with proposals which would force a borrower to dispose of their interest in a Principal Private Residence (PPR) “unless the running costs of staying in the PPR are disproportionately large” the “professional standing of a borrower is not expected to be a factor in this assessment”.
Speaking to The Irish Times last night Mr Stafford admitted to being clumsy with his choice of words but said it was “impossible to talk about all of the complexities of personal bankruptcy in a 10 minute radio interview”. He suggested that it was “inevitable that misunderstandings can arise, and that statements can be taken out of context, which is exactly what has happened in this case”.
Mr Stafford said the commercial reality was that mortgage affordability was dependent on income “and so it follows that the more income you earn, the bigger mortgage you can afford, and therefore a bigger house.
He pointed out that PIPs were obliged to comply with the law which states that they shall ‘insofar as reasonably practicable’ formulate a proposal that does not require the debtor to vacate his family home and would have to consider factors such as the cost of the house and the debtor’s income.
“Whether a debtor gets to retain his family home is wholly dependent on the creditors. The same rules apply to trophy houses as they do to one bedroom apartments. The commercial reality is that some debtors will generate enough income to retain their home, whether it is a trophy home or a one bedroom apartment. The law is the same for all types of houses.”
He said the in some cases the banks would stand a better chance of getting their money back “if they allow a debtor to retain their home, whether it is trophy home or a one bedroom apartment. However, in other cases it will simply not be possible for some people to retain their homes, trophy or not.”