Bankruptcy levels expected to soar
Published 22/07/2010 | 05:00
Soaring levels of company insolvency and court judgments for unpaid debts point to an explosion in the number of people being declared bankrupt in the near future.
Last year a mere 17 people were declared bankrupt by the High Court while a further seven schemes of arrangement between debtors and their creditors were approved.
While both of these numbers were well up on the previous year, they remain statistically insignificant.
That is about to change and soon. With the number of court judgments for unpaid debts and company failures soaring, thousands of personal guarantees, which borrowers thought would never be called, are now being triggered.
According to figures compiled by 'Stubbs Gazette', the courts granted judgments against unpaid debts of €1.03bn in the first six months of this year.
This was a four-fold increase in the value of the judgments granted in the first half of 2009. Among those on the receiving end of such judgments were hotelier and publican Hugh O'Regan, property developer Bernard McNamara and former Kingspan director Brendan Murtagh.
There were 792 company insolvencies recorded in the first half of 2010.
This compares with 625 company insolvencies in the first half of 2009 and just 306 in the first half of 2008, according to figures compiled by Insolvencyjournal.ie. This means that first-half 2010 company insolvencies were up by 27pc on the 2009 level and by a massive 158pc on the first half of 2008.
Not surprisingly most of the insolvencies, almost three-quarters, were concentrated in the construction, services, retail and hospitality sectors.
Judgments against limited companies for unpaid debts of more than €10,000 were also well up in the first quarter.
There were 525 such judgments in the first half of this year compared to just 285 in the first half of 2009.
So why, if insolvencies and judgments against both companies and individuals are soaring, is the level of personal bankruptcy still so low?
If Irish bankruptcy levels were to equal those in the UK on a per-capita basis, then we would be looking at about 5,000 bankruptcies and 3,500 schemes of arrangement every year.
Will things ever get that bad? Don't bet against it. With the banks desperate for cash and many borrowers having foolishly given them personal guarantees it could happen, and sooner than you might think.