Advisers paid €21,000 average for helping struggling debtors

Personal insolvency practitioners were paid €557,807 for advising people struggling with overall debts that totalled €397 million under the State-funded Abhaile financial aid scheme for the final three months of 2016.

A previously unpublished analysis of the scheme, run through the Money Advice and Budgeting Service (Mabs), shows that the average payment made to the personal insolvency practitioners, including accountants, was €21,454. The highest payment made was €42,435.

The Abhaile scheme was launched last year to encourage people struggling to repay home mortgages to make contact with independent advisers, including accountants and solicitors, in order to set up formal arrangements to deal with their financial problems.

Mabs issues a voucher worth €500 to debtors through the scheme, which is supported by the Insolvency Service of Ireland, the Legal Aid Board and professional accountancy bodies to pay for the advice.

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Some 26 personal insolvency practitioners out of 75 advisers on a panel submitted claims relating to 907 vouchers for the final quarter of last year. This was up 38 per cent from 658 vouchers during the previous three-month period.

The level of mortgage debt recorded against the vouchers was €244 million, while the current market value of the family homes was €183 million, showing the depth of negative equity affecting debtors.

Distress levels

The bulk of the cases, 575, were in arrears of more than two years, reflecting the level of distress in these cases. A further 241 cases were in arrears for one to two years.

In just over half the cases, it was recommended that debtors apply for a protective certificate stopping creditors from taking any action for 70 days so that a debt reduction proposal to be negotiated.

The report, by the Insolvency Service of Ireland, shows that an alternative solution was provided in 42 per cent of cases, while it was recommended that the debtor file for bankruptcy in 6 per cent of cases.

Some 25 per cent of individuals sought help through the scheme because their cases were at the repossession courts. Another 25 per cent were referred by Mabs, while 19 per cent had received a letter from their bank saying they were being considered.

Dublin accounted for most of vouchers, followed by Cork, Meath, Kildare and Louth.

The 3,700 vouchers issued since last autumn show that the scheme has encouraged people to seek advice over their debt troubles, said Lorcan O’Connor, director of the Insolvency Service of Ireland.

“It is addressing that issue around someone in really hard times not being able to get the advice they need,” he said, “so it is getting them up on that the first rung of that ladder.”

Not far enough

David Hall, chief executive of the Irish Mortgage Holders Organisation, said Abhaile did not go far enough in dealing with the 34,551 mortgages in arrears of more than two years. He suggested "a one-stop shop" or public insolvency service not just to help people seek advice, but to resolve their debt problems.

“There are too many people in distress and too old to enter arrangements,” he said. “You need a coherent and radical approach and put all of the relevant services under one roof and in one place.”