Up to 30,000 householders may avail of insolvency Bill

AS MANY as 30,000 mortgage-holders are likely to avail of provisions in the new Personal Insolvency Bill to deal with their debt problems, according to the Independent Mortgage Advisers Federation.

There are about 80,000 mortgage-holders in the Republic who are in arrears for at least three months, federation spokesman Michael Dowling said. He stressed that these were in the category of owner-occupier and did not include a “much greater” number of people in difficulty with buy-to-let mortgages.

The proposed legislation, published yesterday by Minister for Justice Alan Shatter, provides for a personal insolvency arrangement for secured debt, including mortgages, of up to €3 million as well as unsecured debt.

Mr Dowling said the federation reckoned up to 30,000 people would require this form of debt resolution to deal with their home-loan difficulties. He praised the Government for holding firm on the figure of €3 million, despite pressure to impose a cap of €1 million.

However, he was critical of the fact more than 50 per cent of the secured creditors must approve the arrangement. “We feel this gives the bank too much power,” Mr Dowling said. “Secondly, we are concerned there is no appeals mechanism.”

The Bill is expected to be enacted into law by mid-November. It proposes an insolvency service to operate the new processes. The Department of Justice said the intention was that this “would be established by the end of the year”.

When asked how many people were likely to avail of the provisions in the Bill, the department estimated between 16,000 and 17,000 in the first full year of operation alone.

This was described as a “tentative estimate”, based on a “rough extrapolation” from comparable British and Northern Ireland situations.

The Bill was welcomed by barrister Vincent P Martin of New Beginning, a voluntary group working to solve over-indebtedness.

“It is ground-breaking and brings Ireland in line with modern European insolvency law,” he said

“It has the potential to defuse an economic and social time-bomb, but it will be heavily dependent on how borrower and lender engage in the process. They must engage in an honest, real and constructive way.”

The director of the Free Legal Advice Centres (Flac), Noeline Blackwell, broadly welcomed the Bill as providing a structure for people to start dealing with unsustainable debts in a structured manner.

She said Flac had concerns around the “imbalance of power” between banks and debtors, as the Bill preserved the creditors’ veto in respect of the debt settlement and personal insolvency arrangements.