Numbers with debt solutions using insolvency service rises

The number of people availing of debt solutions through the Insolvency Service of Ireland has increased.

A total of 1,302 applications were received by the ISI from people who between them owed €610 million in the first quarter of 2017.

The equivalent figure in the first quarter of 2016 was 570 people, an increase of 128 per cent year on year.

The number of those applying for a debt solution was also up 16 per cent on the last quarter of 2016.

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ISI director Lorcan O’Connor said the spike in numbers was directly attributable to the success of Abhaile - the State-funded service for people whose homes are in mortgage arrears.

Free consultation

When it was launched, householders were offered a voucher for a free consultation with a personal solvency practitioner.

They were also offered a face-to-face meeting with a solicitor and the possibility of representation at any repossession hearing.

Mr O’Connor said 90 per cent of those in mortgage arrears who used the service were able to stay in their homes after reaching agreement with their lenders.

Some 40 per cent were able to exit their debt solution within 12 months.

The ISI included a number of anonymous case studies in their report, as none wanted to go public.

One involved a couple who both lost their jobs in 2008. They had combined negative equity on the family home and an investment property of €615,000. After servicing all their debts, the couple had a net monthly disposable income of just €552 a month.

A solution was reached whereby half the family mortgage was restructured to a level sustainable for the borrowers - the other 50 per cent was warehoused without interest until the death of the longest-surviving spouse. The bank repossessed the investment property and wrote off the negative equity.

Split mortgage solution

In another case, a 51-year-old single woman had a net income of just €205 per month after paying her debts. Through the use of a personal insolvency arrangement (PIA), she was able to implement a split mortgage solution over six years.

Half of the €262,780 debt was warehoused without interest payments for her lifetime. Her mortgage term was extended for five years to allow her mortgage repayments be reduced to a sustainable level.

The most common solution was a split mortgage in which payments on a section of the mortgage is parked for a set number of years. The other most common solution was an extension of the loan period.

In approximately 30 per cent of cases, there was a writedown on the debt of an average of €93,000.

Mr O’Connor said the purpose of restructuring mortgages was to find a solution that works for both mortgage provider and home owner.

“A lot of the cases we have been involved with to date have been in the repossession courts. The key objective behind the personal insolvency legislation - keeping debtors in their home - is being achieved,” he added.

He suggested that debtors should go to backontrack.ie to see what is available.