Insolvency Service defends low number of write-offs it has arranged
Published 15/07/2014 | 02:30
THE body set up to administer debt deals for over-stretched borrowers has defended the number of official write-off arrangements it has approved.
The Insolvency Service of Ireland (ISI) admitted it had got off to a slow start, but said the rate that debt deals were being agreed had now picked up.
It said 120 arrangements for stricken borrowers were approved in the April to June period this year.
Just 27 of these deals involved mortgage debt, in a so-called personal insolvency arrangement (PIA).
Bank of Ireland told TDs recently it would not write down mortgage debt.
There are 58,549 residential mortgage accounts that are in arrears for a year or more, according to separate Central Bank figures.
Last week, there was a call from the Oireachtas Finance Committee for a review of the operation of the new insolvency service because of the cost of doing deals and the low number being arranged. The ISI started accepting applications from borrowers last September.
Head of the ISI Lorcan O'Connor said: "Although the numbers have been low to begin with, they are increasing every month. The trend is moving in the right direction as people become more comfortable with the suite of ISI debt solutions."
He said there had been 850 applications for debt deals made to the insolvency service since it launched.
Between April and June 98 people were made bankrupt, bringing the total for the year to 164. There were 58 bankruptcies in the whole of last year.
Some 150 protective certificates were issued in the second three months of this year. A protective certificate stops the clock on lenders who demanded repayments while a deal is negotiated. There are now 138 personal insolvency practitioners.
Most of the deals agreed in the second quarter of this year were debt relief notices, which allows the write-off of generally unsecured debt of up to €20,000 under a three-year supervision period. A quarter of deals proposed to lenders fail, the ISI said. And the new service said it had put in place a debt-relief arrangement protocol, setting the agreed documents and terms and conditions for getting agreement on a Debt Settlement Agreement (DSA).
The Oireachtas Finance Committee called on the Government to overhaul the new insolvency regime. The committee said "barriers to bankruptcy" needed to be addressed.
It noted the public refusal of some banks to engage in any writedown of secured debt and called for a review of the existing legislation to "mitigate against such practice".
The Irish Mortgage Holders Organisation, which represents distressed borrowers, said the small number of deals concluded showed the insolvency system was not fit for purpose.
The ISI last quarter completed 27 PIAs and 30 DSAs.