Business Property & Mortgages

Thursday 18 September 2014

Large take-up expected for new fast-track insolvency agreements

Published 05/06/2014 | 02:30

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Rules which favour the wealthy are unlikely to change

THE head of the Insolvency Service has welcomed new moves to fast-track formal debt deals for families.

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The comments came as the Irish Mortgage Holders Organisation said it has an agreement in place with AIB and EBS to process three-month insolvency deals.

The Irish Independent yesterday revealed details of new fast-track deals which could see thousands of people discharged from insolvency within three months, instead of between five and six years.

Director of the Insolvency Service Lorcan O'Connor said quick insolvency agreements would help the new service gain wider acceptance among those unable to meet mortgage and other repayments.

Finance experts said that up to now there had been marked reluctance by banks and over-stretched borrowers to opt for a formal insolvency deal.

Just four personal insolvency arrangements (PIAs) were in place in the first year of operation of the Insolvency Service, its latest figures, which go up to March, show.

Mr O'Connor admitted that progress had been slow in getting insolvency deals agreed, but new fast-track deals would widen acceptance of the service.

"We welcome accelerated PIAs and are happy to process them. It is a sign of the further evolution of the overall process," he told the Irish Independent.

A small number of these fast-track insolvency deals have already been put in place, completed and approved by the courts.

But finance experts said they were ready to roll out large numbers of them, as they were favoured by banks because they are cheaper than a five to six-year personal insolvency deal.

Waterford-based personal insolvency practitioner Mitchell O'Brien said there was nothing in the insolvency legislation on the minimum amount of time a PIA could take.

In the three cases he has had court approval for, amounts in excess of €100,000 were written off the mortgage debts, while most of the other borrowings were wiped out.

A lump-sum contribution of €100 was made in each case.

And the Irish Mortgage Holders Organisation (IMHO) said it has secured agreement with AIB and EBS that will lead to faster PIAs in situations where people are giving up ownership of their home or investment property to the bank.

Unsustainable

The term of the arrangement will be no longer than three months.

David Hall, of the IMHO, estimated that there could be in the region of 4,000 people with unsustainable mortgages held by AIB and EBS who might be able to take advantage of the new arrangement.

He claimed the new structure would be akin to the "shortest bankruptcy in the world".

"This structure will allow some real movement in the insolvency system, and more importantly, allow people in serious debt to avoid long-term insolvency arrangements and bankruptcy terms."

Meanwhile, the Central Bank has told the main banks they must have offered sustainable mortgage solutions to 85pc of customers who are over 90 days in arrears by the end of the year.

Irish Independent

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