THOUSANDS more people will apply for debts to be written off under new personal insolvency rules than expected, new research has found.
As many as 25,000 people will apply for personal insolvency debt deals.
This prompted experts to conclude that the Government and the Central Bank have underestimated the demand.
There is set to be a rush of heavily indebted householders seeking to restructure mortgage debts and other borrowings when the new Insolvency Service gets up and running in the summer, according to calculations by business information publication 'Stubbs Gazette' based on poll findings by Red C.
The new Insolvency Service will replace the current inflexible bankruptcy system with court-back deals between over-stretched borrowers and banks. Some debts will be written off if a payment agreement is observed over a five to seven-year period.
But people in these types of arrangements will be told how much they can live on, if the bank signs off on the deal.
Almost 250,000 households will qualify for some form of deal under new insolvency laws, according to the research seen by the Irish Independent.
Out of these, close to 7,000 expect to be made bankrupt over the next year.
The new act allows someone to be automatically discharged from bankruptcy after three years if they meet strict conditions. This is down from 12 years at the moment.
Justice Minister Alan Shatter said last week he expects 3,000 people to apply for bankruptcy in the first full year of operation of the new Insolvency Service.
He said it was difficult to be precise on the exact numbers who will use the new service, but estimated that 18,000 will apply for debt write-offs as part of the debt agreements to be approved by banks, and rubber stamped by the circuit courts.
'Stubbs Gazette' has estimated a much higher figure of 24,500. This is in addition to those going bankrupt.
Managing director of the insolvency publication James Treacy said his estimates were based on questions asked by Red C to 760 households about their income, arrears and types of money they owe.
"If anything, the Government and the Central Bank have underestimated the likely demand for the new personal insolvency service," he said.
However, despite the expected large take-up of the new schemes for strung-out borrowers there is a low level of awareness about the new legislation, the Red C poll found.
Nearly two-thirds of those questioned were unaware of of the existence of the new insolvency measures.
And the stigma attached to insolvency and bankruptcy for consumers is fast disappearing, with the survey finding that half of respondents would look negatively on someone who avails of a personal insolvency deal.